Escaping the walled garden

9 November 2011

Non-traditional players are stealing the banking agenda. To stay relevant, financial services organisations need to start delivering genuinely innovative and useful services based on the best of mobile technology and social media.

By Tim Tyler,
solution director,
Social and Mobile, Misys

For all the talk of online banking, the exciting role of mobile and the influence of social networks, it still sounds as if we’ve been here before. Why this sudden outbreak of nostalgia? Cast your mind back to the earliest days of the dial-up Internet. One can probably remember that in the early 1990s, most useful consumer experiences were confined to ‘walled gardens’ such as AOL or CompuServe.
Once logged on, you could browse packaged content often delivered via partners in popular consumer sections including news, shopping, holidays and - yes - banking. The point is, as an early web user, one rarely strayed beyond AOL boundaries because the wider web in those days was a pretty scrappy affair.

In 2011, it feels as if the market has come full circle. From a consumer and a corporate point of view, one brand dominates the online experience. Facebook has more than 800 million active accounts and it is increasingly the destination of choice for many web users.
Of those active accounts, 50 per cent log on every day. That’s a lot of people, a lot of eyeballs and a lot of consumer power concentrated under one URL. If not a walled garden, Facebook is definitely an online black hole, a super-dense mass with an irresistible pull on consumers and content.

So what is the best way forward for banks? Many have set up Facebook pages and Twitter accounts which enable them to measure customer sentiment and drive marketing campaigns. But even some of the good examples are reactive channels, rather than forces for genuine innovation.

The secret to earning new business and extending customer loyalty is more than a Facebook page, a Twitter account and a set of analytics tools. Instead it is much better to think of social media - along with the next generation of mobile devices - as the raw materials.

Smart banks will work with vendors who can fuse these elements to deliver genuinely innovative and useful solutions that differentiate their business from the competition. Misys' GeoGuard is a good example of this approach in action, which makes use of location-based social media applications so that customers can confirm their location to authorise bank transactions and get fast access to money in an unfamiliar location.

As there is no on-premise software or hardware, banks can deploy it easily on their existing infrastructure. Best of all, it is simple to use: the bank’s customers need not change their existing behaviour to be able to take advantage - location is being baked in to ever more consumer-services, allowing customers to use Facebook, foursquare, TripIt or even Twitter to confirm the place that they are visiting.

Getting the social and mobile mix right for banking

Getting the right mobile presence is also critical when you look at the uptake of mobile services. IDC predicts (1) that by 2014, more than 50 per cent of all online interactions will take place on mobile devices. And when you hear Facebook’s mobile chief say much the same thing about access to its service, then it’s even more important that banks do not get left behind. Especially when new entrants, such as Bank Simple, are about to enter this space unencumbered by legacy systems.

Pushing this argument further, banks can use the latest online technologies to help consumers and businesses adjust to the new realities of the global economy. The past three years have upended the financial expectations of millions of people, especially students and first-time earners and many start-ups are responding to their needs.

A good example is PayDivvy.com. Set up to provide a bill management system for personal and group payments via web or mobile, it allows users to pay, send and split bills from one place in real-time - so users only ever pay their 'fair share'. With more people choosing to live in shared houses with shared responsibilities, the service is a neat, timely response to a new social need.

Another site, Payoff.com, provides a way to manage debt and motivate savers by consolidating debts and payments on one platform. Users can see their debts going down, and savings going up. At the same time, they get to share their dreams and successes with a
community of people in the same situation.

The current online and social landscape offers a massive opportunity for traditional financial services providers. They enjoy the infrastructure and the reach that start-ups and some social networks would die for, and in spite of the crisis and the odd scare story, they are still trusted by the majority of consumers and businesses - and the industry should not underestimate the importance of trust in this new social world.

These are big advantages but they will not necessarily last. Certain banking technologists and decision makers still insist that social media and mobile devices are for kids. Social media and mobile technology are maturing at a staggering pace. To avoid being a follower rather than a leader in this space, banks need to move fast.

Click here to learn more about using social media to innovate the customer experience

(1) IDC Worldwide New Media Market Model, 1H11 - Aug 2011



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