A New FACE of Banking

Banks have the reputation for being laggards when it comes to innovation

creation and adoption, accepting and embracing innovative technology only

when faced with extinction. Slowly crawling from archaic bank & branch

banking to drive-thru banking to door-step banking to ATM banking to online

banking to mobile banking to branchless banking, some banks are ahead

of the rest with social media banking, popularly Facebook Banking.

Global statistics indicate there are now close to 1.44 billion¹ active Facebook

users who spend little more than 20 minutes per day on this social media

platform. The millennials (15-34 years) are the most active age group on

Facebook registering a 91% while 62% of them post about what they are

doing, where they are or who they are with. About 63% of Facebook users

say that the social media platform is a source of news for them.

Know Your Customer (KYC) norms

are widely followed by banks more so

for regulatory and compliance

fulfillment rather than to literally

“Know Your Customer”. Banks not

only struggle to get insight into

existing customer’s demographics but

have also failed to identify and target

potential customers. This has forced

many banks to “Go Where Your Customers Are”, that is, social media

especially Facebook.

Two banks that have excelled in using social media to avail a variety of

banking services are DenizBank, Turkey and ICICI Bank, India. In 2012

DenizBank claimed: “The First Facebook Bank Branch of the World” ² when it

started offering a range of banking services on Facebook, which included

24/7 money transfers and monitoring of customers credit cards, deposits

and credit accounts. All this was possible by means of “Customers First”

application available on the bank’s website to reach out to 31 million

Facebook users in Turkey.

Similarly, ICICI Bank in 2013 launched its Social Media Bank App on

Facebook to engage with 65 million active Facebook users in India. The App

achieved a million likes in just over ten months and almost 2.2 million after

just fifteen months. The App comes with a spectrum of features like Check

Account Summary, Check Mini Statement, Cheque book request, Stop

Cheque request and Upgrade debit card. Before using Facebook for customer

engagement, 24% of the online mentions of ICICI were negative and only

19% positive. Now, 49% are positive and just 6% negative. The bank

realized that a key part of the use of Facebook banking is for customer

servicing, not just engagement.

Some banks are trend setters in the banking domain by using social media

data as critical inputs in credit decisions. Facebook offers a mine of data to

spot behaviors and patterns that can inform a broad picture of credit risk.

Monitoring of customer’s posts help to learn about product needs and

preferences. Using Facebook the bank is able to access demographics and

interests: favorite books, music, movies, relationship status, employer etc.

Basically, all profile information is available to banks for segmentation and

targeting. They know where their 'followers' are in their lives: Are they

single or married? Are they newly engaged and saving for a wedding? Are

they looking for a property to purchase in the near future?

In addition to Credit Bureau checks, scores and history, one simple

creditworthiness check is finding out if a borrower actually has a social

media footprint. Facebook has become almost omnipresent that it can set off

a red flag if a person doesn't have an account. To deepen their insights into

individual customer behavior, banks have already started to request access

to clients' Facebook account and see whether users have a stable friends

network—a sign they may be less of a credit risk than users who change

friends frequently. We are not very far from times when we could be denied

credit or offered differentiated products and services based on social media

footprint.

The need of the hour for product development firms is to direct their IT

capabilities on social media enabled solutions, be it for launching various

banking products and services or mining social media data to aid in

customer profiling and credit decisioning. Banks are desperately trying to

respond to these threats in the market but the required innovative and

disruptive technologies to capitalize these opportunities are just not

available.