Banking's Facebook frenemies

Banks have been in the headlines this week for all the wrong reasons with ANZ in court for the latest round of a class action case alleging many of its fees are illegal.

It is something of a major indictment of the bank's technology efficiency (or lack of) that it can continue to argue that $35 represents the actual cost to the bank of handling a late payment, but that's a story for another time.

What's equally interesting is that while 34,000 ANZ bank customers line up to sue their bank, the banking sector is looking for new ways to get closer to customers through social media.

In the UK, HSBC is at the tail end of a long-running case in which it has proposed a revised $62.5 million settlement with investors in an Irish fund that lost millions in Bernard Madoff's Ponzi scheme.

As the case was coming closer to being finalised, a headline popped up in PR Week that HSBC had a “secret plan for its 'own version of Facebook'”.

“Moving away from direct sales, we will build a distinct digital offering centred on customer's future needs financial and non-financial,” says the brief, which was published in part by PR Week.

The bank later played down its plans, arguing that it was simply looking to build a list of preferred suppliers for social media services.

But contained within the leaked brief was the statement: “We will simply ask our customers to share their needs, and we will then feedback where possible to help people fulfil them.”

Crowdsourcing ideas

It's a strategy not that dissimilar to that being pursued by the Commonwealth Bank which this week revealed plans for an online community that will encourage customers and developers to collaborate on ideas to improve the overall banking experience.

The portal, dubbed IdeaBank, is set to be launched on Friday as part of the bank's centenary and will allow consumers to discuss, promote and demote each others' ideas. The bank says the most popular ideas will be picked up for “immediate consideration and possible implementation". 

There's little doubt crowdsourcing of ideas is a growing trend, but the project will live or die on the bank's ability to execute. There's no shortage of ideas out there on how to improve banking, what's always been missing has been a bank willing to deliver them, even if it means compromising shareholder value.

I wonder how many customers will vote for the idea that the bank abolishes all penalty fees.

That's the problem with a bank trying to be a friend to its customers – friends are demanding, sometimes unrealistic, and often needy.

Meanwhile, new financial services providers without the legacy fee structure and exposure to financial markets are emerging. And it's these organisations that banks are trying to compete with, particularly on the social media front.

Finding “Financial Personality”

Movenbank, which is being built by Australian banking consultant and author Brett King, has recently launched an alpha site which drew controversy for forcing users to register and sign in via Facebook.

Instead of expecting customers to apply for a loan, Movenbank will encourage all of them to earn points or credits which at a certain level means they will instantly qualify for a given amount of credit.

Movenbank says it is collecting the information users make available on their Facebook profile's “Info” screen that they have marked as Public, such as first and last name, current location, and profile picture, to customise the delivery of its services.

Rather than reinvent the wheel, Movenbank says it wants to use the information gathered from public sites like Facebook to identify a customer's “Financial Personality.”

Whether customers are willing to go down this path with a new provider like Movenbank is an experiment many will be watching closely.  The fact that big banks are already making similar moves is a sign they are worried.

The problem is there's a major misalignment between the data banks already hold about customers, and how they use that data.

Movenbank is starting from scratch so can logically explain why it is using a platform like Facebook to help meet customer needs.

It's harder for a bank to explain why, despite all the data it already holds on you, it wants you to be its friend on Facebook so it can improve the products and services it offers. This is why Facebook and other social networks are likely to remain the place where customers complain about their bank, rather than the place we visit to get a better deal.