James Gardner, Head of Innovation and Research for a major UK bank and author of the blog BankerVision, commented on my urge for banks to rush into social media last week, and reckoned it didn’t cut the cloth.
Banks are only just on the net and learning about mobile, he says, and banks see no point in the social media space at all.
So there.
I came back with a retort that I was talking about social banking and social money, and that social media and social networks may not be a bank’s focus.
How’s a bank going to make money out of being social, for gawd’s sake?
Well, the more I thought about it, the more I thought I ought to explain exactly what I’m thinking so, this week, I’m going to talk about these areas in depth and their relevance to banks and banking.
First of all, let’s define our terms.
Social media is like mainstream media but user-generated. It’s blogging instead of newspapers; YouTube instead of TV; and podcasting instead of radio. It’s media, but social media.
Social networking is like real-world networking but online. So it’s Facebook, MySpace, Bebo, QQ, Badoo and more. It’s where people date, talk, meet, relate and even work together, on occasion. It’s networking, but socially and remotely.
Social banking is providing bank services but, in a similar fashion, through social methods. It is the process of personalising banking and enabling people and businesses to see the people and businesses they are saving and investing with. It’s Zopa and Prosper, Wesabe and Mint, and many more.
Social money is the way to make payments peer-to-peer, and has already taken off big time with PayPal, but now has many other pretenders, especially in the mobile space.
On that last point, please note that all of these services are based upon Internet Protocols (IP) as the platform, but may be delivered through any device including TV, PC, mobile and blackberry.
Those are brief definitions and, during the week, we’ll look at each in much more depth starting with social media.
As mentioned, social media replaces traditional media as a source of news, views and entertainment.
Already, most TV is being watched online.
This does not mean that the TV has been replaced by the internet as the primary entertainment source but, for a large range of demographics, this may be the case.
Meanwhile, how many of you pick up a paper every morning to read?
How many of you pick up a free newspaper these days?
It’s free because print news is worthless. It's out-of-date by the time it hits the streets, so you read it more for the tactile feel, the fact you don't have access to the net or TV, and for the opinions and commentary.
When working at the home office, my usual office, then my morning is typically made up of reading a number of daily alerts from news sources, including traditional ones such as the Financial Times, and reading them online.
Many of these alerts are from blogs, diggs and other sources however.
So it’s social.
I read what the crowd I follow read.
If my mates say a story is worthy, then it’s worth reading.
That’s social.
Finally, I only really listen to the radio when in the car. Otherwise, I’m on the train or in the gym listening to podcasts. Downloaded radio podcasts, as well as news and views from industry punters and individuals.
This is the world of social media.
So how can a bank make money out of social media?
Bear in mind, I’m not talking here about social networking, banking or money, just media. I’ll talk about the others tomorrow, and in sequence.
To be honest, I don’t think a bank should try to make money out of social media.
Social media is not there for money-making but for customer engagement, which leads to money making.
And what does it mean for customer engagement?
Well, on the one hand, it’s understanding customer attitudes and ideas.
If customers are out there saying the bank is awful, horrible, difficult, complacent, arrogant, greedy or worse, then it’s engaging with those customers to find out why they think the bank is all of those things.
It’s more than counter-acting negative views though; it’s looking for ways to engage with people to create positive experiences.
Start posting stories that help those people out there who are struggling with finance, for example, by proactively advising them.
This tends to be the domain of independent blogs and aggregator sites today, although there are some great bank examples in this space, such as Royal Bank of Canada’s site aimed at students.
What these sites do is create a relationship with people, through news, views, advice and ideas. That’s the point of social media: to create a conversation that leads to a relationship that leads to trust that, eventually, leads to business.
So there is a point to this after all, and banks can make money out of social media.
Not social networking, banking or money, social media. Money out of blogging, podcasting and posting videos on YouTube.
I’ve already talked about one leading bank who are leading practitioners in this space: Wells Fargo, and there are others.
For example, search YouTube for ‘bank’ or ‘bank advice’ and you get a load of dross.
Under the search for ‘bank’ the first page of results, in order of relevance, contains a video supporting a petition campaign to get rid of Paul Wolfowitz from the World Bank for promoting his girlfriend who worked for the bank, Bank of America singing U2’s One at an internal staff meeting, and a guy who was shot dead in a police shootout after stealing $54,000 from a Bank of America branch.
That’s entertainment!
What is not realised is that you delve a bit further and there’s a whole video channel dedicated to advice about money, created by YouTube with - yes, you guessed it - Bank of America!
The trouble is you search "YouTube Bank America your money" and the first result returned points you to a user-generated video that tells you all about how banks are destroying America. Here’s the description:
“WATCH AND LEARN: I have taken the wonderful documentary by Aaron Ruso called ‘America: Freedom to Fascism; and edited it down to a 6 part, 57 minute series that will teach you government secrets about the Federal Reserve Bank that ‘they’ don't want you to know. The Federal Reserve is neither Federal nor a Reserve. Owned by a corrupt group of International Bankers, it is a privately owned monopoly, largely responsible for creating America's National Debt.”
That's a shame as it means that even with a multimillion dollar spend on social media, Bank of America, like most banks, don’t get this social stuff. Either that or that YouTube should be fired for allowing that video to appear before Bank of America's Your Money Channel.
Generally however, James Gardner's blog probably does agree with my own thinking, as I think we're both saying that banks don't get social media.
Many are trying, but they're not there yet.
Banks don’t get the world of social media or social networking, and certainly have not even tapped into the potential of social banking.
It's because it seems woolly and won't make money.
That's why the only space banks are experimenting with any focus is in the area of social money, and that’s thanks to the impact of PayPal.
This is a huge mistake however as, like James Gardner’s blog, it’s too easy to dismiss because it just appears to be a boondoggle.
If that were the case, then how come most of my relationships are accessible through my mobile and online channels?
How come most of my influencers come through those channels?
How come mainstream media means nothing anymore, as I’m using social media to determine most of my thoughts, actions, ideas and investments?
Let me say that again, “I’m using social media to determine most of my thoughts, actions, ideas and investments”.
It does not mean that I've dropped mainstream media entirely, but it's integrated with my social media and the two balance each other to determine who I trust and invest with.
That’s the point.
The point is that social media creates a conversation that leads to relationships that leads to trust that leads to business.
Ignore this space at your future peril.
Come back tomorrow to see how banks can make money out of social networks such as Facebook.
I agree with both of you. The social banking part and the social media side.
I content that the big breakthrough will occur at the intersection of these two areas. We are in fact the old and current center for the town, a well of sorts.
Once Bank's understand that they have and always will be social - they will work on connecting all of the customers and driving some real lasting value. This new social network will combine elements of social lending, savings, loyalty and payments.
Posted by: Jeff Carter | December 01, 2008 at 10:25 PM