web 2.0 and why banks should care

Web 2.0 And Why Banks Should Care

Colin Henderson

thebankwatch.com

NetFinance 2007

19th April, 2007

Scottsdale Arizona

“Reputation economy”

Colin Henderson | thebankwatch.com 2

Internet is killing business models

RetailingResearchNewspapersMarketing

Yet Banks have survived ....


Motivation for online banking is largely cost driven

Generally .. Pure cost playElimination of Branch activities

6%

9%

13%

4%

2%3%

0%

2%

4%

6%

8%

10%

12%

14%

2005 2006 2007 2008 2009 2010

Source: Aite Group, September 6, 2006

Source: Pew Internet & American Life Project, Online Banking 2006

Online bill payments – 39%

Checks – 34%Harris – Jan 2007


Meantime – new Internet models

along comes, Zopa, Prosper, Wesabe, CircleLending, Kiva, FYGO ....

Common theme - simple forum for participants to listen, interact, learn .....Middleman eliminatedIn the lending examples,typically borrower and lender get same rate


Message 1

Banks are vulnerable because of their built in cost structure, arising from technology and branches


Online banking causes other sets of problems

Financial services consumers have changedThey're mistrustful, insecure, and hands-on.The result is that customer satisfaction has plummeted. What satisfies consumers are firms that are customer advocates

Firms that demonstrate the four aspects of customer advocacy

simplicity, benevolence, transparency, and trustworthiness

.... enjoy higher customer satisfaction rates and greater cross-sell success

Forrester Research: Firms That Demonstrate Customer Advocacy Overcome Mistrust


Online is an essential part of shopping experience


Internet has highlighted the purchase process


Amazon has made a science of user engagement.

Amazon sells the same products as competitors such as Barnesandnoble.com, and they receive the same product descriptions, cover images, and editorial content from their vendors.

... orders of magnitude more user reviews, invitations to participate in varied ways on virtually every page.... even more importantly, they use user activity to produce better search results. Amazon always leads with "most popular", a real-time computation based not only on sales but other factors that Amazon insiders call the "flow" around products

Barnesandnoble.com search is likely to lead with the company's own products, or sponsored results,


What has changed here?


People want to interact – the web facilitates this

Harnessing Collective IntelligenceHyperlinking is the foundation of the webeBay's product is the collective activity of all its usersAmazon has made a science of user engagement.... greatest internet success stories don't advertise their products. Their adoption is driven by "viral marketing"--that is, recommendations propagating directly from one user to another

The power of the permalink.. easy to gesture directly at a highly specific post on someone else's site and talk about it. Discussion emerged. Chat emerged.

If an essential part of Web 2.0 is harnessing collective intelligence, turning the web into a kind of global brain, the blogosphere is the equivalent of constant mental chatter in the forebrain, the voice we hear in all of our heads.

http://www.oreillynet.com/lpt/a/6228


Within 5 years, net generation will outnumber the rest of the working population

College internet ... or younger


Commenting on interactive sites is growing


Message 2 – transaction based online banking is not adequate to keep customers interested

Generational changeDifferent expectations about how internet should be interactive, and participative


How can this be accomplished?

Can social networks really replace Bank staff?Social plays a role in new models – what's the role for Banks?

Is there a better way to provide Banking that levers social activity to provide guidance, assistance, and advice


McKinsey say Banks lag all firms in anticipated use of Web 2.0


Web 2.0 hints at very a different business model

Wesabe


Small, incremental, steps are being taken ... within the industry

Vancity

Ufirst

Wells Fargo

Verity Credit Union


Big leaps are being made ... from outside

Wesabe

Prosper

Zopa

Boober


Setting up a will

Use only cash

Wesabe


Who are “V”

Blog link from their site


Change Everything – Vancity CU


Student LoanDown – Wells Fargo


Ufirst, Plattsburg, NY State

Flickr

Comments

Internet language


Thank you!

Questions, thoughts

[email protected]

thebankwatch.com

web 2.0 and why banks should care

Documents

user activity

customer advocatesfirms

user reviews

science of user engagement

collective activity

comonline banking causes

amazon insiders

cost structure