2016: Fintech’s Amazing, Stupendous Year

Reading Facebook news or Twitter feeds you’d have to conclude that 2016 was a pretty awful year, but by all accounts, Fintech had easily its best year yet. In 2015 we saw a net investment in Fintech ventures that has been estimated at $22.3[1] Billion in total, but by January 2016 some $7 Billion[2] had already been invested into the sector globally. While a Series A and Series B crunch took hold in the second half of the year post-Brexit and pre-Drumpf, we know that 2016 saw similar net investments in Fintech to 2015. This all means that since 2010 more than $60 Billion of venture capital and private equity has made its way into the sector. Roughly in line with what US banks have spent on digital transformation over the same period. PWC estimates Fintech investment will exceed US$150 Billion over the next 3-5 years. That’s putting aside the fact that bitcoin is hovering around $1,000 again too

More importantly, we’re now seeing a clear trend that Fintech’s are deploying capital much more efficiently than their incumbent counterparts, a fact borne out by what has been achieved by the estimated 14,000[3] Fintech startups globally in the last couple of years. Here are a few examples:

The 800 pound Unicorns

In the US we talk about FANG stocks (Facebook-Amazon-Netflix-Google) as the foundation of NASDAQ’s growth curve coming off the Global Financial Crisis, but in China it’s all BAT (Baidu-Alibaba-Tencent). The reality is that while the US has given birth to more than 20 Fintech Unicorns, compared with just a dozen in China, the top 6 Chinese Unicorns are worth 3 times their US contemporaries combined. This is largely due to the fact that Fintech in China is outpacing the rest of the globe in terms of consumer impact. How do we know this to be true?

Ant Financial, the holding company that incorporates AliPay, raised $4.5 Bn at a $60Bn valuation in April of 2016, that’s just a shade under the $68Bn valuation of Uber’s last funding round. That puts Ant Financial’s market valuation at almost 3x that of Deutsche Bank. In fact, at one point earlier in 2016 Ant Financial was worth 4x what Deutsche Bank was worth. Think it’s overvalued?

Let me give you two reasons why it isn’t.

Firstly, Alipay is the world’s largest payments network by far. To illustrate, Visa’s network peaked at 9,000 transactions per second in 2015, Alipay at 87,000 transactions per second. Alipay is now available in 77 countries globally, and that is expanding rapidly. On November 11, 2016, Alipay settled RMB 120.7 billion (USD 17.8 billion) of gross merchandise volume (GMV) through it’s network – 82% via mobile handsets. Apple Pay hit $10Bn in total transaction volume for the year in 2015. Considering Visa’s market cap is $181Bn, Alipay looks like a bargain right now. The mobile payments market in China exceeded US$500Bn in 2016, and it’s growing at 40-60% right now. Ant Financial and Tencent claim 70% of that market today.

Secondly, Alipay has demonstrated better than any other company in the world, with the possible exception of Starbucks, the ability to leverage mobile for deposit taking. In 2015, Alipay through their Yuebao wealth management platform, managed $96 Billion in AuM – all via mobile and online channels. Alipay has no branches.

This has spurred a mobile deposit war in China with Tencent and Baidu launching competing initatives. WeChat’s online savings fund raked in $130m just on its first day of operation. However, Alipay clearly set the benchmark and established the market. The downside for banks is that the with 20% of the Chinese deposit market shifting to mobile providers, cost of liabilities in the mainland banks has risen 40%.

Dramatic efficiencies

Fintech banks like Atom, Simple and ourselves at Moven, are now consistently able to acquire customers at 1/20th of the cost of chartered banks who rely on branch networks[4]. Alipay and Wechat are acquiring deposits at 1/100th of that of US banks.

Name a major retail bank that has been able to build a middleware and cloud-based core system, deploy mobile, wearable and online channels, and acquire hundreds of thousands of customers for under $25m consistently.

Simple, Moven, Atom and Number26 have between them less than 700 employees, but have successfully deployed retail banking capabilities in 23 countries.

How long before the market recognizes that Fintech’s are simply more efficient at doing banking than listed banks, especially when it comes to utilizing technology for market growth and customer acquisition. The Neo-Banks and tech payments networks have proven you just don’t need branches to acquire customers or deposits, and traditional retail banks won’t compete on the same basis.

Not just for Silicon Valley, not just retail

Whether M-Pesa in Kenya, B-A-T in China, Xero in New Zealand, Housing.com in India, SoFi and Funding Circle for SMEs, Transfer Wise, Klarna, Square, iZettle and Stripe in payments, Lufax, CommonBond, Prosper, Lending Club and Jimubox on Lending, the reality is that Fintech Unicorns are tackling every part of the financial services sector imaginable.

The 80 odd Fintech unicorns on the planet have a combined market capitalization of more than $200 Billion at the end of 2016, that puts them pretty close to level pegging with ICBC, the largest bank in the world. Considering we added 36 new Fintech Unicorns in 2016 alone, you can expect that number to grow.

What I’ve seen in 2016

Personally, 2016 was a monster year for myself and the teams at Moven, Breaking Banks and the team that supports me on the speaking circuit. I launched my 5th book Augmented: Life in the Smart Lane in June, and started BANK 4.0: Embedded, Ubiquitous, Extinct. Augmented hit #1 in a bunch of non-banking categories at launch, including Robotics, AI, Biotechnology, and Computing. The book achieved bestseller status within the first week of launch in more than a dozen countries. Bank 3.0 remained the #1 selling English language Banking book in China for the 3rd year in a row too.

I visited 25 countries in 2016, a reduction of about 22% based on 2015, but still more than 72 cities, and almost 200 sectors, most long-haul, eclipsing a total of 275,000 air miles. Or enough to get me to the moon conservatively. Most of that was a combination of speaking and Moven related travel, but I can say that the speaking business hit the US$1m gross fees level in September this year, and with less speaking days than in 2015. But I did get to do Lagos, Budapest and Prague for the first time.

Breaking Banks continues its 3-year unbroken record as the world’s first and the #1 Fintech Radio show and Podcast in the world. While others have recently claimed that their podcast has hit #1 on iTunes, BreakingBanks has cast a much broader distribution net and iTunes only represents about 17% of our total traffic. Our WVNJ 1160 AM band listenership in New York alone consistently outperforms iTunes on listeners, and of course, that doesn’t include syndication across American Banker, Asian Banker Journal, Bank Innovation, BankNxt, Next Money, Soundcloud, Google Play, Stitcher Radio, Podcaster, and many other non-iTunes channels. BreakingBanks exceeded 300,000 listeners in September and October, or about the annual listenership of our nearest global podcast competitors a16z in #2, Wharton Fintech in #3 and 11-FS in the #4 slot. BreakingBanks airs live in 76 countries, and is downloaded in close to 150 countries consistently, also making it the #1 Business Show on the Voice America network – the Internet’s longest running talk radio media outlet. We even launched a spin-off podcast, with our host Sam Maule, called Fintech5

On the Moven front, we launched in Canada with TD to critical acclaim under the TD MySpend moniker (and with a #1 slot on the App store). TD now boasts over 800,000 registered users, a result that exceeded target projections by almost 400%. Westpac New Zealand launched version 2 of the Moven service in the form of CashNav and got to 90% of their mobile user base in just 6 weeks. TD performance data shows that 30% of TD’s customer base using the app has reduced their spending by around 10% solely because of MySpend. This is the first time a so-called PFM tool has produced such significant savings across a broad cross section of customers, and certainly the only time via a mobile app. 1 million users are live with Moven in 3 countries, and in 2017 we expect to hit somewhere between 5-10 million app users in at least 6 countries.

With Moven smart savings launching in multiple markets in 2017, we expect to be generating world-class mobile cross-sell numbers and deposit generating behavior at a fraction of typical acquisition costs.

In the last quarter of 2016 Moven completed three major commercial deals that fund us at least for the next 2 years, and gives us line of sight to $20m in revenue for 2017. A 300% increase on our performance this year. It was a great way to finish out the year.

A hard act to follow

Personally, even though I was shocked at the Drumpf election and Brexit results and was, for a time, considering moving to Mars with Elon Musk… The reality is that in terms of Fintech and for me personally, I just don’t think we all could have achieved much more in 2016 than we did. 2017 has a tough act to follow, even with blockchain and AI developments.

[1] Source: Accenture Estimate – April 13, 2016

[2] Source: FT Partners – Jan 30, 2016

[3] Source: Various

[4] Typical range in cost of acquisition for a neo-bank is $5-40/customer, whereas the US average is $272/customer and the Big 4 generally pay $350/customer+.


Why Kids don't sign, and banks shouldn't either

In a recent UN/ICAO commissioned survey on the use of signatures in passports, a number of countries including the UK recommended phasing out the long held practice because it was no longer deemed of practical use. More significantly, however, is the emerging trend that has some parents, educators and lawmakers espousing their concern – when asked to sign most kids these days are simply writing their name – the art of the signature may soon be a lost art. A recent report in Gulf News disclosed that this is a global problem with kids in Canada, Tokyo, Hong Kong and elsewhere moving away from written signatures because they live their life through technology, but without the need to sign.

There’s been an outcry of sorts over the last few years at the fact that most schools are no longer teaching our children cursive writing. Many consider the increasingly lost art of cursive writing a necessary life skill, not at least because a good written signature really requires it. As early as 2006, researchers observed a dramatic decline in the use of cursive script. In fact, it was in 2006 that of the 1.5 million students in the United States who completed the SAT exams, 85% of them did not use cursive writing, but printed their essays in what we’d typically call block letters.

Cursive writing itself is an artifact of a bygone era. A time when writing with a quill required keeping the quill on the paper to prevent blotting or the problem of leaving a big drop of ink behind as you lifted the quill. The word cursive derives from the 18th century Italian corsivo literally meaning “running”; i.e. running words. While the Romans are generally first credited with the use of cursive writing, the Italians of the 14th century renaissance made it into a veritable art form.

In the 19th and early 20th century all children were taught cursive script, and left handed school children were even forced to write with their right hand to prevent them from dragging their hand across the still wet ink. Although the ballpoint pen was patented in 1888, it wasn’t technically viable until the invention of so-called “solid ink” much later in 1945. By the 1950s the ballpoint had replaced the quill in most classrooms. Despite this innovation cursive writing remained an artifact in the classroom for almost 40 years after the disappearance of the quill. But is it that signatures are failing because we’re not teaching our kids cursive writing anymore?

The signature as an artifact has been a staple of society for the better part of a millennium, but the signature itself dates back to the year 439 during the rule of the Roman Emperor Valentine III. When it came to signing a contract or important documents like the Magna Carta, or the Bill of Rights, the signature was the unchallenged standard when it came to a unique identifier. Considered unique and difficult to copy, individual signatures were like your legal fingerprint. The obvious question is, can a signature based on a method of identification employed 1600 years ago still be the best method of identification we’ve got?

When this was written, signatures were the most reliable form of identification used

When this was written, signatures were the most reliable form of identification used

Signature required?

One of the reasons students around the world today lack the basic skill of a signature these days is that they rarely have to use one until they enter the workforce. In fact, all of the basic services these guys use today simply don’t require a signature for opening an account – Facebook, Google, iTunes, Snapchat, Instagram, Mobile Phone Accounts, etc. If they have to open a bank account or rent an apartment, they might be required to provide their John Hancock.

But let’s get real.

Signatures aren’t actually an effective form of identification anymore. Have you ever seen someone in the checkout line ahead of you get rejected at the store for a bogus signature? How could the staff tell? A pal of mine, Dave Birch, actually signs all sorts of fake names when he’s asked to sign, but never uses his actual signature – why? He reasons if he finds a transaction where someone has actually used his name on a credit card receipt, then he immediately knows it’s a fake.

It’s hard to believe the entire banking system is held together by something as basic as a signature today. In fact, it isn’t held together very well. The United States is the last remaining country to have not adopted the EMV Chip and PIN standard, and thus still relies on signature at the Point-of-Sale. Which is why despite accounting for just 25% of all card transactions globally, the US has more than half the card fraud for the entire world – yes, that’s more than the rest of the world combined. The signature patently doesn’t work to stop card fraud. So what about for day-to-day bank account operations?

When was the last time you actually had to sign a withdraw slip to get cash at a bank branch? Yet, in my experience 9 out of 10 banks still require a signature card to open a bank account today – why?

Signatures are risky!

The fact is that I can verify someone’s identity through much more reliable methods than using a signature card or signature verification today. Just looking up someone’s profile on LinkedIn or Facebook, their social security number (if you are in the US) combined with an identity document (drivers license/passport) and facial recognition, are vastly superior data points to a signature on a piece of paper. In fact, the amount of data I can bring to bear to verify an identity today means that if a bank is still relying on a paper application form with a signature, they are simply absorbing a much greater level of risk than is necessary. Yes, you read that right. A signature card and a paper application form mean you are absorbing an unacceptable level of risk as a bank.

Clearly the customers of the future are not big fans of a signature – they’re not writing checks (or cheques). They’re not working with banks that use signature cards generally either. Their life is based on a digital persona, and real-time digital access to their phone or bank account is increasingly based on biometrics that are much better fraud prevention measures and identity verification methods than a cursive writing-based signature. Why insist that these kids still sign their college application, mortgage application or bank account opening form in this day an age? It just doesn’t make sense.

If you don’t believe me – sign your next credit card receipt as Mickey Mouse and see if the merchant accepts it…

Mickey_signature

 

Oh, and if you detach yourself as a bank from the need to sign an application form? You can deliver revenue via the smart phone, more easily than you can in a bank branch, and that is going to be huge the next few years!!

 

 


Gen-M: the abandonment of “touch and feel" and the emergence of "see and hear"

Baby Boomers and Gen-X have in common the need to experience life in all it’s glory. Whether that is born out of a sense of adventure, the need for tactile feedback or in the sense of face-to-face social connections, at the core of much of our buying behavior historically has been the need to ‘touch and feel’ a product before a purchase. There’s a subtle shift in this behavior with Gen-Y and Gen-Z/Digital Natives (sometimes collectively called Generation-M or the ‘multi-tasking’ generation) that is critical to understand if you are going to engage this community successfully moving forward, and it emphasizes why the physical store is under increased threat.

In the banking space I’m often confronted with passionate arguments for why face-to-face interactions, why the availability of advice and the psychological comfort of brick-and-mortar spaces still matter. The problem is that those describing these ‘values’ are inevitably Baby Boomers or Gen-X consumers, describing their comfort levels and buying behaviors. There are a number of key trends we can observe today that signify an abandonment of this traditional buying behavior for the next generation of customers.

The psychology of buying is changing

The last 10-15 years has already seen a significant shift in buying behavior as a result of changing distribution models. When the web started to mature and the dot com phenomenon emerged, we saw the first changes in buying behavior around the willingness to buy physical products like software, books and CDs via online stores. Over time this impacted the retail storefront of the book and music industries as less and less people visited physical stores. The argument oft heard, however, was that products like clothes, shoes, electronic goods, etc. still needed a good old storefront interaction. But success of brands like Zappos, Amazon with their broader retail, and the phenomenon of ‘showrooming’ and the influence of mobile in-store is part of a broader behavioral change, a change in buying behavior writ large.

Visual search and curation are rapidly emerging as key platforms for Gen-M consumers

Visual search and curation are rapidly emerging as key platforms for Gen-M consumers

Pinterest, Instagram, Tumblr, and other social networks are all very powerful communication tools for Gen-M. YouTube is their most popular search engine. Their connection to brands is no longer based on a need to touch and feel the product, or to connect face-to-face. Their connection is visceral, but driven by different senses. Generation M have moved from touch and feel, to see and hear as their new connection with brands, and it needs to happen at speed.

Take a Gen-X attending a concert. They go for the experience – to be a part of the event, experience the band live, to be immersed. The Gen-M digital native goes for the experience too, but they’re driven to share photos, video and to extend the experience of the event to their network. Personal connection to the experience is balanced with the need to share and talk about that experience.

The teenage female of the species would gather at the mall in the 80s and 90s to have a retail shopping experience with her friends, the experience wasn’t the purchase alone, but the collaboration, the social connections, the mall experience. They’d find their way as a group in the shopping environment, trends would develop based on what looked cool, what emerged through group consensus. Today that shopping experience is driven collaboratively online through shopping “haul videos”, discussions around back-to-school or spring break fashion and the like. Decisions on fashion choice aren’t driven by that in-mall collaboration or advertising messages, but through online advocacy, connection with the brand via content – not the store.

 

Michelle Phan is an example of a new brand that resonates more powerful with Gen-M that traditional media or brands

Michelle Phan is an example of a new brand that resonates more powerful with Gen-M that traditional media or brands

It’s why videos like this Lady Gaga Makeup Tutorial has 33 million views. No bank has ever got even a fraction of this type of advocacy-based engagement or traffic via YouTube today.

This is why advocacy of brands is such a critical driving force for this new generation of consumers. This is why they think in pictures, why they video themselves, why they check-in and share photos, why Instagram and Pinterest have grown so fast amongst this group. They want to have a visual connection with the product or brand, and they want to hear about the experience of the brand, whether directly from a friend or from a trusted platform such as their social network.

This is how Gen-M connects.

Advocacy is built through seeing and hearing a brand

So when you think about designing the next generation of banking or retail understand that the buying behavior of your core customers over the next decade is dependent on a connection of seeing and hearing what your brand is all about, not touching and feeling the product or brand in-situ, not getting advice or speaking to an expert. No one is a better expert than their friends in a network who’ve already tried your product out. The old concepts of Product, Place and Promotion don’t work in this space. Campaigns have very limited application, because they don’t trigger advocacy well and I’ll always trust my network over a brand message built by an advertiser.

How are your customers connecting with your brand in the see and hear space? Touching and feeling the product is no longer critical. Funneling customers into the store is no longer the best customer experience. Today it’s all about creating a connection with the brand through a product or service that I can advocate and share.


What will it take to restore trust in the banking system?

I grew up in a world where a run on the ‘bank’ was never realistically going to happen. I grew up in a world where when someone wished to declare the truthfulness of their assertion they’d simply say “you can take that to the bank” or when it was a sure thing they’d say “you can bank on it!” I grew up in a world where the government ‘guaranteed’ my deposits, my cash, or my nest egg – as long as I deposited it with a recognized bank or financial institution. But that was then…this is now.

Long memories

In the 1930s and 40s in the United States after the Great Depression, there was a perception that the destruction of individualism and community banking practices in favour of cookie-cutter branch banking approaches built on efficiency, sales, and transaction banking was a risk to the stability of the banking system. If there were just a few big banks, and there was a broad loss of confidence, then the whole system could fail. This explains why the US has so many institutions (7,334 FDIC-insured institutions as of 8 March  2012) compared with other developed economies (5,404 banks in the entire EU[1]) , as US regulators historically sought to institutionalise community support and make it harder for monopoly approaches. These so-called “foreign systems” of branch banking were labelled  “monopolistic, undemocratic and with tinges of facism” and as “a destroyer of individualism”.[2]

This lingering psychology of safety in the physical banking place (and density) stem from long memories over epidemic “runs” on the banking system during the Great Depression:

“It is known to be a large bank and, being distant and perhaps consisting of thousands of branches, is less distinctly visualized than the local bank; and so the people are likely to think of it as great and powerful, and able to meet its liabilities. In the second place if the depositors were to initiate a run on a local branch, it would be difficult to spread their psychology and arouse depositors in distant branches.”[3]

There was a whole post-war generation that grew up with a healthy skepticism of ‘big banks’ and the risk of a run on the bank. With almost 70 years having passed since the Great Depression, however, the banked population as a whole finally started to believe that banks were inherently securely, safe and trustworthy. We were in for a rude shock!

Trust evaporates in the Global Financial Crisis

Since the Global Financial Crisis we’ve learned that banks are just like any other business, if run poorly they can and do fail, and unfortunately there are many banks that made poor business decisions last decade. Many exposed themselves to sub-prime mortgages, CDOs (Collateralized Debt Obligations) and ABS (Asset Backed Securities), others were over leveraged, had poor risk mitigation strategies, or had their own lines of capital too heavily tied to capital markets. Some like Northern Rock were struggling financially long before the financial crisis, and thus were quick to face dire problems when the economy turned south.

The modern day “run on the bank” @NorthernRock (Credit: The Guardian UK)

We also learned that despite a government-backed system of licensing and regulation, that banks aren’t actually part of a social-support mechanism built to help the end consumer – banks are simply corporations with a primary focus on generating profitability for their shareholders. We learned that at a time of great angst in the community over the role and health of the banking system, bank’s support for consumer financing and lending, that there was no overriding moral imperative to bank policy. In fact, they’d be quite happy to take tax payer funds on the premise that it would increase liquidity and allow them to lend back to the end consumer, when none of that happened and they were more likely to invest those funds in generating bank profits and large bonuses for their executives.

As consumers do we trust banks? We might trust that the deposits banks hold are secure, but we’ve seen through the veil and know that banks are not infallible, they’re just corporations hell bent on profits, like all good companies should be. We know they can be mismanaged and fail, and while we might have been ready to support a “bail out” when the financial crisis first hit, we’re now dubious as to whether that was the right strategy.

Regulation and Advertising won’t rebuild trust

The concept that the industry can rebuild trust in banking through a combination of corporate messaging, advertising or reinforcing regulation is somewhat erroneous.

Consumers today have a healthy skepticism and distrust of big banking. As consumers we also have a social dialog structure (social media) that allows us to reinforce our healthy skepticism at mass scale. There’s a group psychology involved, but one that society perceives as a protection, creating transparency. Banks might feel frustrated at this, but the reality is that ‘trust’ in the industry was largely engineered over the last few decades through a combination of advertising and visible regulation, and with the missteps of the crisis quickly evaporated. Now similar attempts to re-engineer trust are likely to backfire.

“Trust” is a common theme in many banking ads

Even regulators, who might believe they are protecting the market and consumers, are increasingly just creating friction between the consumer and institutions (through increased regulation) and the resulting customer frustration and cynicism works against reinforcing trust.

The only way for us to ‘trust’ banks again like we used to, is changing the way banking works. The greater transparency and the better banking serve customer needs, the more we’ll trust banking to work for us. Transparency, utility and great service are all that ultimately matters now, because the old pillars of trust safety, security, brand messaging, fiscal management and regulation are no longer effective.

 


[2] Source: American Banker Journal, 23 March 1939, p.2

[3] Branch Banking: Its historical and theoretical position in America and abroad, Arno Press 1980 (Chapman and Vesterfield), page 275


Respect the crowd – don't shut them out

Well, I see the Facebook/Twitter hysteria is at fever pitch again. There’s the concern around market events like the fake Sina Weibo post stating that Kim Jong Un had been assasinated, apparently corroborated by the evidence of a cavalcade of black limosuines arriving at the North Korean embassy in Beijing around the same time. This started in China on Weibo, and within minutes had been translated into a fast trending topic on Twitter.

To be fair, while everyone is crying foul of Twitter and social networks for the potential chaos they could cause with false reports, the reality is Twitter and microblogging sites like Weibo get it right far more often than they get it wrong. This same week Twitter broke the news of Whittney Houston’s death a full 45 minutes before the press picked it up, just as it had with the death of Michael Jackson and Osama Bin Laden. The fact is, Twitter is more likely to break major news first, than any TV network these days. The unique aspect of Twitter is not only that it breaks the news first, but it allows a dialog around that news – so people feel not like they’re are just watching the news, but that they are a part of it – living it, participating.

Twitter doesn’t get it wrong all that often. Keep in mind Twitter users now send 1 Billion Tweets every 4 days. The instances of Twitter getting news like Kim Jong Un wrong, is miniscule in that stream.

If you are arguing caution on Twitter, it is like suggesting you don’t watch TV or read Newspapers because 1 in 10,000 stories could need a fact check.

Respect the medium’s power – the flow will continue with or without you. Fearmongering over minor hiccups will only distance you from those you must seek to engage.

Westpac’s miscalculation

Then we have Westpac’s attempt to filter or censor the crowd’s backlash at their mortgage rate hike. The primary criticism came as a result of the fact that Westpac raised mortgage rates ahead of any move by the Reserve Bank, ANZ quickly followed, as did Comm Bank and NAB later in the week. The issue is not the rate hike per se, but Westpac’s response to criticism by customers.

If you haven’t yet figured out how social media works, it’s about time that someone clears the air. Social Media platforms like Facebook, are not about spin, control or nuancing an audience. Despite what you might think, Westpac’s Facebook page is not owned by Westpac. It is a community forum to discuss the brand, on a platform hosted by a neutral third-party – Facebook.

While Westpac thought that this might have been a safe option (getting rid of the negative comments from irate customers) the fact is they just made the situation worse.

It was as if customers were ringing the call centre or walking into a branch and voicing their disatsifaction with the rate hike decision, and Westpac was hanging up on them mid-sentance, or worse, ejecting them from the branch forceably for not being nice to Westpac in their hour of greed. That’s how customers see it.

The dialog is an opportunity – take it

If you are going to be a brand living in the world of hyperconnectivity today, you can’t think like you used to think 10 years ago in respect to communications strategy.

Westpac had an opportunity to discuss their rationale on the rate hike in an open forum and accept that customers were not happy with the increase. Half the time when you get irate responses, people are simply looking for validation, for their complaint to be heard, to be recognized. If you can address their problem, then they’re generally delighted. That’s how you earn the trust of digital natives – you engage them and you validate their voice. What you don’t do, is cut them off at the knees if they don’t agree with your spin or brand positioning.

Citibank took an entirely different approach to the dialog opportunity. They were the first global financial institution to get Twitter accounts and start actively seeking support and dialog opportunities. When they launched their iPad App back in August, they even integrated Twitter into the App for customer support.

Right now we’re seeing a shift in customer sentiment and the way Y-Gen consumers select financial institutions, this is bleeding over into other segments as well. Brand’s need strong advocacy to remain relevant in this new dialog space, but you won’t get that advocacy if you don’t provide the respect to your customers that they expect and deserve in the transparent, social space.

That’s what Westpac got wrong. By trying to filter or censor the Facebook stream, they thought they were conducting damage control in the old marketing/communications sense of the word. Instead, they increased their risk of brand pushback and negative sentiment exponentially. A much tougher and longer term issue to deal with.

Respect the crowd – they have enormous power and will be the future of your brand. Understand that the crowd can advocate your brand, that they can be a massive resource. Push them away, and you may never again get their trust.

Talk to them, even when you screw up, and they’ll respect your openness and willingness to improve, adapt and engage.


I'll never login with Facebook to my bank!

We’re experiencing a massive shift in consumer behavior right now with the explosion of Facebook, Twitter, YouTube, and other community collaboration and social media platforms. A world where Facebook has 800 million inhabitants and a President who is a college dropout (albeit Harvard).

We’re seeing the global domination of mobile across the entire world, where before long every person on the planet will have a mobile phone – and soon that phone will be a wallet. Smartphone owners will be the majority in just a few years as smartphones are virtually free on contract, and unlimited data is bundled free. Already the average smartphone user spends more time using Apps than they do using an Internet browser on their computer.

The traditional players amongst us say that such things don’t really change the fundamentals, that “it will take time for people to trust these new mechanisms”.

I’ll never login with Facebook to my bank.

I won’t pay with my mobile phone unless I understand how secure it is. This NFC technology is too new and there’s no common standard.

Huh?

The same people who said this probably said…

I’ll never use email, there’s nothing like calling someone or a face-to-face discussion to solve a problem

I’ll never use an ATM machine, I don’t trust a machine to give me money.

I’ll never get a cell phone – I don’t want people to be able to call me whenever and wherever I am.

I will never put my credit card details on a website online – are you crazy?

I’ll never bank online. Not in my lifetime…

I’ll never need a Facebook account – it’s a waste of time, it’s just for college students.

Really?

If you are saying you won’t do something that millions of other people are already doing, that’s a sure sign that it’s going to disrupt the hell out of your business and you’re in trouble.

If you’re not planning to work differently, if you’re not thinking differently, then you’re just out of touch, you’re just one step away from irrelevance. You’re fighting the flow upstream and getting pushed towards disaster.

The one constant of the internet-enabled world is that you have to be ready to change constantly. Resistence is not only futile, it’s stupid and very costly in the long run. It’s cheap and easy to be social right now, same for mobile – it won’t be in the future.

Right now you have two choices.

Start experimenting with how to adapt to these new methods

Start figuring out what people want to talk about on social media. When they’re using their phones at a store, for searching on products, when they check-in, tweet or update their facebook status.

Start talking to them. Start sharing content that isn’t marketing messages pushed down their throat, but helps them.

Start trusting consumers to talk to you about your brand, your products and about what they want from their bank or services provider. Understand you can’t control the conversation, but you can and should participate in it.

Open up new products and services based on social media. Get consumers to give voice to their needs and help you form those ideas. OCBC, DBS, First Direct, ASB, Comm Bank are all trying different types of crowdsourcing to develop better relationships with their customer base.

OR… Ignore the obvious, get ready to be displaced

Our customers don’t feel safe using Facebook for login!

But some of them might… how long before most of them will? How do you meet your KYC requirements and keep customers safe when allowing them to do this? Are you going to wait till everyone else is doing it, or are you going to learn how to do it properly and securely now. Are you asking your compliance teams to find ways of figuring out how to do this stuff safely?

It will take years for the mobile wallet and NFC to take off!

Right now Google and Apple are eating your lunch and you don’t even know it. You are getting ready to write off the one device that is most critical for connections and context with your customers in the later part of this decade. Someone else is going to own your customers, and as banks we’re going to be paying the likes of Google to include our branded card in their wallet, or our products and services and messages on their platform.

We already have to ask permission from Google and Apple to give our customers our App.

Don’t want to change! You will…

The fact is most of the last two decades we’ve been facing constant change, and no one organization has been able to resist the shift because customers decide how and when you’ll engage with them.

Customers have already decided they want their mobile device to be their bank. They’ve already decided that they want to discuss your brand and your service capability in the open community of social media.

Now it’s time for you to decide that you want to stay relevant to your customers. Or ignore the obvious and go away.


Who's easier to save, a banker or a dictator?

Bankers often talk about the ‘trust’ consumers have in banking as a defining characteristic of why customers give banks their money instead of simply keeping it under a mattress. Some bankers might have difficulty understanding why customers of today seem perfectly happy to give money to the likes of PayPal, M-PESA, Lending Club or Zopa. The fact that I trust PayPal to send money on my behalf, in lieu of banks, might have been unthinkable just a few years ago. The concept of lending money through a social network would have seemed laughable too. Part of this is that we just don’t trust banks like we used to, and alternatives seem far less risky comparatively.

Reputational risk is surfacing in the sector as a whole today through social movements like “Occupy Wall Street”, “Bank Transfer Day” and other actions led by frustrated consumer groups and collectives. As an industry, we’re not organizing a structured approach to this challenged perception of ‘banking’. Instead we’re often trying to defend the indefenisble, a system saddled by inertia that assumes we have far greater responsibility to our shareholders, than we do to the customers we are supposed to serve.

Not the Regulator’s problem

At the European Retail Banking Summit held in London on November 8th, 2011, I pitched to European regulators the issue of Social Media, the Occupy Movement and what their position was towards the increased transparency that retail banks were facing. Martin Merlin (Head of Financial Services Policy and Relations with the Council, European Commission) and Philip Reading (Director, Financial Markets Stability and Bank Inspections, Oesterreichische Nationalbank) were at a loss to understand the role of regulators in defining a coordinated industry response. Martin’s response was telling:

“It’s simply not on our radar yet as regulators”
Martin Merlin, Head of Financial Services Policy, European Commission

Customers finding their voice

The new voice of the populace is demonstrated with no greater effect than through the so-called “Arab Spring” across the MENA region. If Twitter, YouTube and Facebook can overturn regimes in Egypt, Tunisia and Libya, I’m pretty sure they can totally undermine the brand of a bank that we’ve previously thought was “Too Big To Fail”.

To add credibility to that notion, in just months we have seen the Occupy Movement develop into a global protest against the economic and social inequality promoted by the current “system”. Consumers today have found their voice. Increasingly that voice is about choice, about rewarding organizations that listen and punishing those that think their decisions are immune from public debate or dialogue.

Prior to social media, the thought of rapid political change in a country like Egypt would have been considered extremely unlikely, a real outlier. Is there a measurable effect of this voice of the consumer on retail financial institutions today? Absolutely.

In January 2011, Bank of America’s (BofA) post financial crisis share price had recovered to $15.31 at its peak. As of this blog post, BofA’s stock is ranging at $5-5.50. This is instructive. Stocks with a historical Beta (β) of 1 are generally tracking flat for the year. So why has BofA lost more than 50% of its value in the last 12 months, compared with a market and contemporaries that have remained flat over the same period?

Bank of America’s share price is at a 2-year low

Overlaying stock trading volumes and pricing, against average and cumulative sentiment (via social media analysis) shows that public displeasure with the company direction and engagement has been a core driver in BofA’s troubles. What is clear is that BofA would not have considered consumer sentiment a significant driver in their share price in the past. They simply could not have run their retail bank badly enough to result in this type of dip in the past unless there was some sort of significant and very public scandal resulting in massive losses. The market is obviously now pricing in concern about the long-term viability of a brand that doesn’t have affinity with the consumers it serves.

A great infographic from EvoApp showing the correlation between sentiment and share price for BofA

What to do next?

Understanding consumer sentiment, and actively managing the brand in this open dialog is going to be a key skill in the near term. This is not about ‘spin’ or control, because as Egypt and the Occupy Movement has shown, you can’t control these forces.

Instead what will be critical is the capability to respond visibly to the markets concern, to improve sentiment. In BofA’s case, the leveraging new Debit Card fees, claiming BofA had a “right to make a profit” and then dropping the planned fees – is no way to demonstrate strategic understanding of consumer sentiment in the social age.

We need a lens on sentiment that drives strategy. This requires a very different board room and executive feedback loop that simply does not exist today.


The Modality Shift of Banking – Part 5

Transparency challenges new revenue and friction

In September of 2009 Ann Minch, a customer of Bank of America, posted a video on YouTube called the “Debtor’s Revolt”. Ann detailed her case against BofA who had unilaterally increased her credit card APR (Annual Percentage Rate) to 30% from its historical 12.99% – quite a jump. She argued as a customer of 14 years, having never missed a payment, that such treatment was unjustified.  She contacted BofA and asked if they would discuss her situation or negotiate the rate change, but they referred her to a debt consolidation counselor.

BofA subsequently argued that the terms and conditions she had signed allowed them to make any adjustments of this nature without consultation with customers like Minch. If she didn’t like it, she was free to cancel her card and go to another bank. This wasn’t the end of the story.

Half a Million YouTube views later mainstream media started to pick up Ann Minch’s story. The pressure was suddenly on BofA to explain their actions, and the story that they were within their legal right to do so, just didn’t stand up to cross examination. All but BofA believed that their actions were unreasonable and extreme. The resultant pressure resulted in a complete reversal of BofA’s decision, a win for Ann Minch right?

Transparency wins

The Ann Minch story, and that of David Carroll with his YouTube-generated hit United Breaks Guitars, tells us that today consumers have extraordinary power afforded to them through social media. Consumers today have a voice, but increasingly that voice is becoming about choice, about rewarding organizations that listen to customers, and punishing those that think their decisions are immune from debate or dialogue. Prior to social media, Ann Minch wouldn’t have had a hope of getting a behemoth like BofA to change their policies or decisions based on her complaint. But it’s not just the voice of consumers on Twitter, Facebook, Google+ or social media more broadly.

A plethora of user driven recommendation apps and tools are coming to the fore in helping consumers choose organizations that respect customer involvement. There’s Nosh and Yelp apps that help consumers choose restaurants that they like, that provide great service or great food. There’s Trip Advisor that has become such a powerful force in the travel game that it gets 50 million unique visitors a month who use the site to select hotels for their family vacations. Then there are staples like iTunes and Amazon (who arguably pioneered the consumer product rating mechanism) who rank listings of their products based on consumer votes and reviews.  Today we’ve seen the launch of First Direct’s new FD Lab as a worthy attempt to engage customers in the future of the bank from a service and product perspective.

First Direct, who already has great customer advocacy, has launched a new crowdsourcing platform for engagement

Outdated processes are just friction

Today we live in a world where you can no longer provide poor service based on outdated rules, processes and policies and argue “hey, were a bank and that is the way we do it”. Today, if you are a bank and you have stupid rules and regulations that have been perpetuated by processes built around unwieldy mainframe transaction systems, or around KYC processes that are overkill for 95% of customers and their day-to-day interactions – you are setting yourself up for a fall.

Banking has been for the longest time built on the premise that you have to jump through a bunch of hoops to make yourself ‘worthy’ as a customer – you have to prove yourself before the bank will deem you suitable. As bankers, we argue that it’s not our fault, that we are saddled with regulations and requirements that force our hand, that require us to approach customer engagement in this way.

That kind of thinking is institutional laziness and denial – it creates friction that frustrates customers, is largely unnecessary and is generally costly and inefficient.

Let me illustrate. Take a long-term customer that walks into a branch (for the moment forget my post last week on the decline in branch visitation :)) and applies for a credit card or investment class product after say 10 years of a relationship with the institution. In by far the majority of cases he or she’s sat down in front of an officer of the bank, handed a blank application form and required to fill out details that the bank has had on record for a decade. Why?

There is no process, rule or regulation that can possibly justify that kind of inefficiency and poor service. If there is a requirement to get a signed consent or legal record of the customer’s acceptance of certain terms and conditions, then print out the required document with all his/her details pre-filled, ask them to initial to confirm their details have not changed, and sign the acceptance of the T&Cs. What is so hard about that?

Recently at my annual review with my relationship manager at a major brand bank, I was subjected to a 7 minute video on the risks of investing in Collateralized Debt Obligations (CDOs) and the fact that I might lose all my money if I invest in this asset class, when I was, in fact, applying for a product that was a low-risk Corporate Bond in a totally unrelated asset class. Why the video then? Because someone in legal and risk decided all customers should sit through this video to reduce risk to the bank. Stupid friction.

Take a customer who forgets his Internet Banking password today. How many banks require him to come to the branch or sign a convoluted document and fax it to the bank to unlock his online account? I know at least two of my bank relationships do.

Take a wealthy HNWI (High-Net Worth) customer that moves to the USA or UK from a foreign country and applies for a credit card, only to be rejected because he has no credit score – therefore doesn’t exist in the system so he can’t be assessed from a credit worthiness perspective.

None of these rules makes sense, and yet banking is choc-a-block full of such friction and opportunities for disenfranchising customers.  This is the perfect storm in today’s user advocated consumer world of open, transparent choice.

Friction kills advocacy

The problem with outdated rules, processes and procedures is that thinking “we’ve always done it this way” or “if you don’t like it you can leave” is simply no longer a viable argument to an increasingly well educated and informed customer. Already we’re starting to see customer advocacy as a key driver in choice of financial institution, and high visibility for customers who voice their dissatisfaction with such friction.

Have a look at a few sample tweets in recent weeks:

@DavidBThomas I’ve been with my bank for 30 years. They “thank” me by telemarketing me at dinnertime.
@NewsCut My bank — TCF — has a security question “What city is your vacation home in?” My bank really doesn’t understand REAL America.
@StevenValentino I hate my bank and I would happily shove what little money I have into my mattress if the FDIC would insure it.
@MadRainbowLtd Halifax bank are sh*t! They let someone clear out my bank account using an old cancelled debit card!
@clarecbarry Bank screwed up appointment for third time. Quite impressive. Now on way to work with meeting with Mr Douchebag

And this wonderful series of Tweets from @docbaty on 29 July

@docbaty Things my bank did wrong today:
1) that it would take two weeks to perform a simple account creation;
@docbaty 2) offered to expedite that process, which means it -can- happen faster, but they’re just not trying;
@docbaty 3) asked me if I banked with Bank Y at all; they do the same thing while you wait…
@docbaty 4) gave me a blank form to complete in sign, when every piece of info – other than signature – is already on file…
@docbaty 5) made an error on the processing fee, charging $2,180 instead of $218. I had to correct their calculations (she’d used a calculator)
@docbaty 6) checked new calculations with manager, while making me wait.
@docbaty 7) failed to apologize.

Now imagine the next generation of customers who are out there looking for a new institution to engage with right now. Where are they going to look before they decide on a life-long relationship with a financial institution? They’re going to ask their peers. They will search on a product or brand and find search engine results prioritized, not by some clever search-engine-optimization techniques, but by how their friends and networks have scored the performance of that bank or credit union. They’re going to ask for recommendations on Facebook, Twitter or Google Plus, and they’re increasingly going to choose new providers who think out of the box and who work on simplicity, great customer journeys and improving customer experience through better interactions.

What used to happen informally now is being hardwired into the brand selection process. What marketers used to call the ‘choice set’. We’re learning that this process can’t be gamed, manipulated or bought as a result of ad spend. We’re learning that the most effective mechanism is simply being great service businesses and listening to customers when they’re not happy. The process is brutal, it’s transparent, and it’s going to kill your brand unless you are honestly engaging customers, and you try your hardest to get rid of those pesky, stupid banking rules that only make sense to us as the bank – and even then, let’s be honest… they don’t really make sense to us either.


The emerging Mobile Payments and KYC clash

When the commercial internet became popularized in the mid-90s the emergence of e-Commerce quickly led to some amazing new business models, and inevitably the hype of the dot com bubble. While much of the dot com ‘crash’ survived and thrived (e.g. Google, Yahoo, Amazon) there were those that appeared happy to proclaim that the fad of the internet was over. Of course it wasn’t over, it was only just beginning.

Ironically, the impact of those new business models and new ‘paradigms’ that emerged in the late 90s are still being felt today. The collapse of Borders recently, can be traced back to the emergence of the online book store as a category. In the midst of the dot com bubble, Borders abandoned it’s web presence and sold out to Amazon who took over the site because web was perceived as ‘unprofitable’. Within just 6 years Borders.com was delivering $160 million in annual revenues for Amazon. At this stage, Borders scrambled to break its ties with Amazon, but they never quite appeared to get on top of the new distribution model as evidenced by their recent chapter 11 status. The clear misunderstanding of the role of the channel, along with a weak multi-channel distribution commitment from the get go, is symptomatic of a more fundamental problem – the business wasn’t able to make the shift away from reliance on their traditional store-based approach to book sales because it was too ingrained.

Blockbuster, Encyclopedia Britannica, Travel Agencies, Stock Brokers and others have faced similar challenges over the last decade.

What does all this have to do with mobile payments and KYC?
Clearly we are entering a phase of massive disruption to the payments system(s) and incumbents of today. To put that disruption in perspective, let’s think about what has led up to the current slew of mobile payments announcements and improvements.

PayPal evolves P2P
PayPal commenced business in its current form around March 2000 with the merger between Peter Thiel’s Confinity and Elon Musk’s X.com. PayPal’s initial business was focused on enabling payments for EBay’s platform. eBay had purchased Billpoint in March of 1999 to provide this functionality, but by Feb 2000 PayPal was handling 200,000 daily auctions and payments, compared with only 4,000 a day for Billpoint.

Today PayPal handles $62Bn in transactions. That’s growing at an incredible rate of 25% annually too, primarily thanks to mobile payments.

Banks didn’t
Although it is patently obvious that person-to-person payments is a huge business and has been growing incredibly online since the late 90s, today the current bank-based P2P system is incredibly archaic and unwieldy for most banks and consumers. Why have incumbents clung on to the traditional ACH, Wire and Cheque-based payment systems in the face of such rapid growth in online payments? You’ll hear two arguments largely. The first being that P2P represented, up until recently, such a small part of the overall payments traffic that it was incidental and there wasn’t a business case of reforming the payments space. The second is that there is an incredible amount of inertia around the current system, and changing that takes perseverance, effort, investment and considerable re-engineering. That effort and investment was unlikely to come until it was absolutely necessary – of which it obviously is today.

Now, 11 years after PayPal’s foray into P2P we have the first broad financial institution focused effort, namely ClearXchange. Of course, we’ve seen CashEdge, PNC Virtual Wallet, and others have a shot at this, but none of the big banks have got behind the prospect of P2P until now. The fact that it has taken a decade is evidence of the same internalized thinking and inertia problems Borders faced in respect to changing distribution models and modality.

Emerging markets go Mobile
M-PESA has already launched in Kenya, Tanzania, Afghanistan and South Africa with well over 13 million customers. G-Cash and SMART in the Philippines are processing more than $500m in mobile payments each year, and that is rapidly growing. It’s estimated that by 2016, total mobile money transactions will reach $126 billion, with Southeast Asia accounting for $30.1 billion.

The key to understanding emerging markets growth has been the high penetration/adoption of mobile phones and the need for financial inclusion of the large swathes of population in the unbanked category. However, clearly the momentum around mobile smartphone adoption in developed markets, the rapid decline in use of cheques, and the massive competition from operators and handset manufacturers is now forcing the hand of the traditionals in the payments space.

Current KYC regs are a poor fit with where P2P and Mobile Payments is going

The End Game – a problem for Compliance and KYC
The problem is that the end game clearly is that you should be able to send anyone with a mobile phone, an email address or a Facebook account or Twitter ID some money anywhere in the world. This solves two long, intractable problems. The unwieldy and needlessly complex system around current wire transfers, TTs, etc and the need to have a bank account with the right bank before you can receive money.

The problem with both problems is the current regulatory environment and bank policy around KYC, AML prevention and security. The more banks insist on complex KYC before you can open an account, the greater the risk is that I’ll circumvent the system because of its complexity. Now I can hear arguments defending such regulation and legal requirements already, but the problem is that the current system is complex because we need to confirm the identity of both parties in a transaction. This is a question of identity, not KYC process.

In December of 2009, my pal Dave Birch articulated a very clear position on why the current KYC regimen can not survive the mobile payments revolution.

“I wasn’t not arguing that we should have no KYC checks, but what I was arguing for was a sensible floor below which KYC checks are not needed. I happened to be in a local branch of national financial services organisation a few weeks ago when, for dreary reasons, I had to get into a queue. The person in front of me in the queue was trying to send fifty pounds to a relative in Liverpool. The clerk told him that couldn’t, because he didn’t have a passport and a utility bill. The chap complained that he had been sending this birthday money every year for decades. The clerk was unmoved. So who benefits from this?”
Dave Birch, Digital Money Blog

To make P2P payments really work, you have to be able to send anyone money at anytime. The current KYC and AML regulations don’t really make sense for day-to-day transactions under say US$1,000 or Dave’s proposed €500. PayPal has been a reasonably elegant solution to this in the short-term, but a long-term solution means if banks want to play in the day-to-day P2P space, they have to push back on stupid KYC rules… and so do we as customers.


The path to social media success

Ok, so the feedback from Finextra’s #finxsm event this week is that we’re finally coming to grips with the fact that Social Media isn’t going to disappear into the night like some passing fad. Good news!

It’s interesting though, whenever a major disruptor like social media, the internet, etc has come along, inevitably there are many traditional managers and practitioners who don’t understand it and label it as a ‘fad’. Just because you don’t understand something personally, doesn’t mean it is a fad. That’s the realization that the industry is going through right now, that is – social media isn’t a fad, it isn’t going away, we need to deal with it. Just because we don’t understand what the fuss is about doesn’t mean our customers won’t use it, and if they’re talking about us we better be listening.

No Facebook allowed here, unless you’re a marketer

So the first trick with social media and how it’s going to effect the business is learning about how it works. The knee jerk reaction for most banks when social media came along was two fold; The first was to try to figure out how to dump traditional advertising and PR campaigns down the pipe. The second was to shut down any access internally within the organization because it was risky for employees to talk directly to the public, and also because it was feared there would be wholesale time wastage from staff playing farmville and other sorts of unproductive, non-work related tasks.

The problem with this mind-set is that is was fundamentally wrong. Primarily, the organization was prevented from learning about the real capability of social media, and this hampered the brand from creating advocacy and engaging customers. Additionally, the reality was that employees were simply pushed away from the desktop internally to their mobile device and the risks that employers were hoping to prevent by shutting off access weren’t prevented they were simply pushed outside of a controlled environment.

Social Media ROI is not a marketing metric

The marketing-led thinking about attempts to control or spin the brand message out through social media characterized as just another broadcast channel, are also fundamentally flawed. Social media is more akin to a dialog with your broader customer audience, not a channel for slamming more corporate comms or campaigns down customer’s throats. Thus, the traditional marketing metrics don’t apply either.

“The ROI of Social Media is that your business will still exist in 5 years”
Erik Qualman, Socialnomics

I was pleased to see the response of Hakan Aldrin, MD of the Benche at SEB when asked if he has numbers to prove the value of his social media community platform he replied, “No. That’s not what it’s for.”

Having said that, while not being a broadcast channel, it is a channel for targeting key influencers to get your message out. Key influencers are those with a sizeable following (1,000 followers or more) who influence their follows – i.e. get lots of retweets, reposts, etc. Recently when Charlie Sheen burst on to the Twitter scene garnering 3.5m followers in just weeks, what did it mean for key influencer opportunities? Ad.ly worked with Sheen to promote internships.com, a new jobs board – one tweet from Sheen got more than 100,00 applications from 181 countries for the #Tigerblood intern spot. No classifieds ad in any newspaper has EVER been able to get that sort of response. Lesson: Engage key influencers!

You too can be #Winning on Social Media

What is Social Media for?

It’s a dramatic opportunity to listen to what your customers are saying and form useful strategies for advocacy, to inform product and marketing strategies based on real-time feedback from customers and it is increasingly a very powerful servicing tool. While there has been some viral marketing success on social media, if it social media is classified as a marketing tool or channel within your organization it means two things:

1. You don’t understand the two-way dialog nature of social media, and
2. You have too many traditional marketing people in your marketing team today

So now that we know social media isn’t a fad – what happens next?

Who’s responsible?

One of the biggest challenges is figuring out who is going to manage social media internally in the business today. Often this falls to some junior marketing staffer, maybe someone in the online team or perhaps a corporate communications or PR team member. All of these decisions would be wrong.

Social media can be used to build brand and advocacy, support and service customers, research new strategies, design new products, create new markets, and to educate and inform. This is going to require a whole kaleidoscope of supporting skills sets and capabilities underneath to do this properly. So if you limit it to being pigeonholed into the current organization structure, somewhere along the line your social media strategy is going to be deficient.

Do you have a head of call centre? Where does he sit in the organization chart? Well the head of social media should be at least equivalent in the organization chart to this resource. Why? If a customer like Ann Minch, David Carroll decides to target your brand because of poor service, bad policy or just plain ignorance, your share price is going to start to take a hit.

The strategy shouldn’t be to try to shut it down or attempting to force employees to refrain from social media activity. When Commonwealth Bank attempted this it backfired badly. The strategy needs to be one of informed engagement and encouraging positive use.

The biggest risk FIs face today is reputational risk associated with a social media blowout. You need someone in charge with common sense, but also with the organizational wherewithal to actually get something done. This is not a junior role. You need a policy that encourages participation across the organization, but that provides strong guidelines, supported by training, on how to engage customers and how to support the brand through social media. But most of all you need a mechanism to take what you hear from your social media listening post and inform strategy, change policy and improve customer experience. That is the potential of social media that is so underutilized today.


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