Social Banking – Banking in the Palm of your hand

I presented the information in this post at 2019 Seamless East Africa Conference at the Radisson Blu hotel in Nairobi, Kenya.  It was a wonderful opportunity to share my views with an engaging audience of Bankers and Fintechs operators.

 

Social banking used to refer to sustainable banking. The expression has evolved and nowadays also covers banking activities conducted through social networking channels or social lending such as peer-to-peer (P2P) lending.

Source: iConcept SEO

stats

42% of the world population uses Social Media.  That's 3.2 Billion people.  91% of all social media users access it on their mobile devices.  68% of US adults use Facebook.

People spend on average 2 hours a day on social media.

Some African Statistics on Social Media are as follows:

  • In Kenya, 30% of adults are on Social Media.
  • Nigeria: 35% of adults are on Social Media.
  • Ghana: 32% of adults are on Social Media.
  • South Africa: 43% of adults are on Social Media.
  • Median usage of social media across 39 developing countries: 53%

Source: Pew Research Center

71% of people who have a positive experience with a brand on social media are likely to recommend the brand to their friends and family.  This is quite different from the statistics we used to see about regular / physical products.  They used to say that people with a bad experience are more likely to tell others about their experience than people with a good experience.  We are seeing now that many more people are likely to share their positive experience with a brand on social media with others.

When I saw this, I thought of WhatsApp.  I did not ever see an ad for it, did you?  Yet it has 1.5 billion users from around 180 countries.

It is clear that banks need to get into Social Banking in order to attract, retain and engage their customers.

Social Banking Maturity

The Social Banking Maturity Model

The Social Banking Maturity Model above can be used by banks to gauge how advanced their social banking strategy is.

At the bottom of the Pyramid, the most basic form of social media banking, is when banks to use social media to interact with their customers.  This builds intimacy with them.  But that is not enough.

The next level up the pyramid is when banks create a chatbot, usually on an existing social media platform, to answer generic questions such as "Where is the closest ATM?" or "When does branch X open?"

At the third level in the Social Media Maturity Model, banks use an AI enhanced chatbot that can answer specific questions like, "Has my salary been posted into my account?" Erica from Bank of America is a great example of this.  Erica was founded 2018. It has Natural Language Processing (NLP) capabilities so it will understand you if you write to it like you would write to your friend. Erica was "born" in 2018 and in 3 months, 1 million people were using her.

An AI enhanced chatbot should also be proactive.  It should be able to write to you when it notices something interesting about your account. So, lets say your gym normally charges $50 then one month it charges $55, a great AI chatbot should alert you, without prompting, to tell you that you should probably call the gym.

The fourth level in the Social Banking Maturity Model is the Social-Media-Like bank. In this level customers can open an operate an account with the same ease as social media account.  An example of this is Revolut.  Revolut was founded 2015.  It is really a Fintech company.  As at June 2019, it boasts of 6 million plus customers.  Several traditional banks are also working to make it easier for customers to open accounts on their phones.

From the bottom of the pyramid up to about half way through level 4 of the pyramid, its banks which are leveraging on Social Media to engage with their customers.

In Level 5 and 6, we have Social Media companies getting into the banking space.  They start out as Social Media companies with a great multitude of users then get into payments and / or other financial transactions.

An example of Level 5 is WeChat.  WeChat was Founded 2010.  It started out as a messaging app.  In Q4 2012, WeChat had 160 million users.  WeChat launched WeChat payment in 2013.  One month after its launch, its users grew from 30 million to 100 million.  Now it has 1 Billion monthly active users.

Level 6 is the current ultimate level of Social Banking.  It is what Facebook Libra is working towards.  Facebook already has 2.5 Billion users.  In the previous paragraph, I mentioned how WeChat users grew exponentially when they launched their payment feature.  If Facebook successfully launch Libra, just think of how many people in the world will be using it for payments.

Now, here is what banks need to pay attention to with regards to Facebook's Libra:

How Facenook will simplify the payment process. Many parties are currently involved. Facebook simplifies it.
S&P Image: Libra could accelerate and simplify the payment model

Look at how many parties are currently involved in payments (top) then look at how Facebook plans to simplify it (bottom).  Banks will not participate in Facebook's payment model.

 

 

Slide9

In the traditional model, banks own the value chain.  With open banking, we are seeing them have an Open API model but they still largely own the value chain.

What banks need to do it create marketplaces. They need to develop and implement a platform strategy that allows consumers and suppliers to connect to one another.

Banks are the best placed institutions to offer a marketplace - platform.  Just about everything we need to do requires money - transportation, food, etc.  In its basic form, a platform allows people who need something to find the people who have it. E.g. Uber - one person needs transport, the other has a car. AirBnB - one person needs a place to stay, the other person has a place they can stay.

Imagine an AI enabled chatbot that has API connectivity to your Power Company.  The AI chatbot would write to you to tell you your bill is due. It checks if you have enough money in your account then offers you an  overdraft in case you don’t have enough funds in your account to cover the bill.

Or it writes to tell you that your child’s homework which is due in 2 days requires some extra school supplies, lists the supplies, finds a suitable shop, gets the prices and asks you to approve them for delivery to your home.  Or that the milk in your fridge is running low, it requests approval to order for delivery in the usual quantities, from your favorite brand, from your favorite shop.  This can be made possible using AI, IoT, API integrations

Slide10

That slide says it all!  7 of the largest global companies are based on a platform model.  When you have a platform model, you are able to collect data about your customers, get to know more about them.  That way, you are able to offer them what the need just at the time they need it.  You can pretty much predict what they might need then offer it to them at the right time.

Data is the new oil.

How to become a platform bank:

  1. Be a magnet - attract the right providers and the right customers.
  2. Act as matchmaker.  Play cupid.  Enable providers to reach the right consumers.
  3. Provide an easy-to-use toolkit so that providers can easily plug into and out of the platform.
Slide15

3 thoughts on “Social Banking – Banking in the Palm of your hand”

  1. Very insightful and captivating information, financial institutions need to leverage on their data and tailor technological solutions to customer needs

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