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November 09, 2010

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Rclow

Chris- thanks for bringing some edge to this discussion. I think that the reality is that consumers are very much like large banks-- they have multiple personality disorder. There's the desire to be many things to meet many desires that are unmet elsewhere, regardless of profitability.

I could go in many directions, but two key points really jump out to me:
1) I agree that banks cannot integrate to customer social lives. The co-mingling of data and profiling would simply hit too many trip-wires (eg fair lending regulations-- what if banks "scored" people who follow Perez Hilton?). As an alternative, there was a great article yesterday about Klout and the potential to use their score for social engagement influence-- this could find its way into niche offerings imo http://bit.ly/9Dzf1e

2) Non-banks are better positioned to leverage social behaviors. Yodlee, Mint and Bundle are better positioned because they're unencumbered by regulatory oversight. Customers choose to give them access to one or many accounts across banks, and can develop unique visualizations, insights, and (still work in progress) highly contextual offers. Bundle is my favorite in the US based upon their unique ability to compare "your money" and spending habits to "everyone's money" in by various demographic options. They also have fantastic content and were engineered bottom-up to be social. Yodlee, and Mint/Intuit are adding these types of elements and banks are beginning to customize these solutions w/in their own websites/mobile offerings. Best chance for social behavior to make it to banks will be there imo.

I'm also left thinking about how non-US solutions are evolving by non-banking aggregators to fill the niches like Yodlee. There is a window of opportunity to globally scale offerings, but it will take a set of banks in each locale to get it up and running.

I'm still wrapping my head around the transition initiatives and applicability. I can't get SecondLife out of my head.
cheers,
rich

Daniel

Awesome discussion - quite edgy and I agree that it stems from the problem of both bank's personality and customers personality. Don't know which to choose.

For a major institution - it would be hard to imagine it to embed deeply into social media - because so much of its status and audience comes from traditional segments - who are not that avid Tweeples or bloggers.

But tactical integration seems like a good fit - offering Lewes pound to promote local county consumption, special YouTube channels for those who would want to watch.

+ 1 to both Chris and Vanessa )

Mike Parker

This is a good level headed assessment of where we are and what's happening as far as specific examples of services are concerned but I think Venessa's blog (to me at least) was also a frustrated appeal to look beyond the current Zeitgeist and understand that there are forces of major social change at work in terms of values and customer / bank relationships. The first comment in her blog was actually about distress with a closing statement which said that the current values held as a broad consensus across the industry would outlast the suggestion of more socially engaged value systems or at least that's how it came across.

Yet the debate about values rather than specific services has got a bit obscured perhaps?

I would suggest that maybe there is a wish expressed by Venessa and the Future of Money folks to see better and more responsible engagement with ethical behaviour. The development of a genuinely engaged CSR policy instead of a lip service one maybe?

On the approach of "banks don't provide it because customers don't want it. Look at this survey" I am reminded of a certain Henry Ford who said: "If I had just focused on what people said they wanted I would only have sold them faster horses".

Venessa please correct me if I am wrong here but I rather got the feeling that The Future of Money and the "rant" (as it now seems to be affectionately known)were saying that it would be good to see the FS Industry addressing major currents of social change and experimenting with offerings that weren't just "faster horses".


Mike

Pragmatist

Hi Chris

Another great discussion brewing, thank you.

I don't understand why anyone expects - or needs - their bank to be interested in financial transparency or generating a relationship with them personally or commercially.

To be fair, there are specific regulatory reasons why mutuals, credit unions remain small, rather than simply "because people don't care" about transparency in financial services. In essence, those institutions have a different financial purpose than the giant money machines that have been relying so heavily on taxpayer subsidies of late. But, regulation aside, the likes of credit unions aren't and can't be responsible for really empowering people. So they aren't terribly interesting, even if we were inclined to express our social proclivities through a financial institution.

Which, of course, most people are not.

Finance occupies a small step in the processes that comprise our various day-to-day consumer and business activities. And those activities are primarily facilitated by businesses with whom we do have more transparent 'relationships' than we have, or could ever expect to have, with a bank.

Realistically, we can only expect banks to be the 'back office' for these facilitators.

VenessaMiemis

hey chris,

great post! thanks for taking the time to respond to all my suggestions.

what is popping out at me is this idea that a bank could be, as michel bauwens put it in the future of money video, an "expression of the community".

as you mention several times here, the kind of relationship i could potentially imagine with a bank would be part money lending institution, part social fabric weaver. this would necessarily have to be a local solution, as it implies that the bank is working intimately with the community. and i think that that is fine/great. the kind of change most people care about is the kind that directly impacts them in a noticeable, measurable way, as soon as possible. so that's where the relationship part comes in, with a bank understanding a person's needs on a hyperlocal level.

i also think that this kind of local transparency and attention to sustainable investment opportunities are an early potential for a longer term disruptive change in the industry. once people have the tools to understand this model at a personal level, and see the benefits of it, and begin to change social behaviors, that expectation will seep out to a larger scale and institutional level. slowly. but eventually.

my question is, what kind of tools could the financial industry design for the intentional purpose of activating people's consciousness and empowering them to make positive impact decisions? (i didn't title my blog "emergent by design" for nothing). :) it is a philosophical debate, but i think if we do not have this fundamental conversation, then we are still operating superficially.

this past two years in a media studies graduate program has been enlightening for me.... in terms of understanding that everything around us is a media, that we live in a mediated environment, and it 'programs' us. money is a media, it was designed to operate on certain rules. though the program is called 'media studies', it's actually social theory. foucault, heidegger, baudrillard, benjamin....
all exploring how we relate to our environment, each other, our own minds. it goes deep, and has informed my thinking on many levels. but i think it's important in helping to understand how our tools fundamentally shape our behavior and our species.

for instance, the above trust/reputation/social capital score that we mentioned as an addition to the traditional credit score. what makes this interesting? again, there is an ethic involved. we tend to care about things that we can measure and choose to measure. (i made a comment earlier this week on twitter asking why GDP isn't more robust to include things like national well-being, happiness, purpose, environmental health, and other expanded examples of wealth. perhaps if we were measuring those things, they would suddenly become more of a national/global priority. but if nations aren't "competing" on who has the wealthiest nation, and only on whose is the richest... well..... ). so the point is, beginning to implement these trust/reputation/social scores is the beginning of influencing the way people think. it's not something to be monetized, it's bringing transparency to an area that is important to us all but is currently rather opaque and tragically undervalued. if we began to create the metrics, it would begin to influence systemic change.

and that last part of your post on the 10 step program for implementing local currencies. it still sounds pretty tough. could a free platform be designed that makes it ridiculously easy to get this going. (answer: people are already working on it. it's just going slowly. could be accelerating with a booster from financial industry possibly).

thank you very much for the dialogue, i do feel invigorated, and i appreciate your respect in giving me such a thorough response.

- venessa

Tekfin

Hi Chris,

Great post. On social media being integrated to produce a composite trust score, this is already starting: http://tekfin.com/2010/10/01/social-media-relevancy-is-the-new-credit-score/

I am not sure that the social framework can be pushed to everything. Activitites that are "naturally" private, such as parts of banking, should remain so.

Yann

Clay Forsberg

I believe at the heart of this discussion is the basic distrust and lack of personal attention the majority of people feel towards their banks. In the days of local banks, your banker knew you.

Loans were made based on the trust they had in your ability hold up your end of the relationship. This relationship not only meant repaying the loan, but also continuing the relationship in future making you a revenue generating long term customer. Disputes were resolved on a personal nature. Thing that needed to be fixed, were fixed. Bankers were part of the community just like dentists and grocery store owner. This is no longer the case.

Banks have become nothing more than utilities. They believe by offering "loss leader" service (free checking that ends to be a bait and switch with overdraft fees) they justify your business. They are the necessary evils of existing in society. In their present form, nobody wants anymore of a relationship with their bank than is required. The last thing I'd do is connect with my bank on Twitter or Facebook. It's this attitude that is fueling this discussion and others. When there are other options to the current financial systems, I for one will be there to jump ship.

I don't want to sound like a Luddite, but all people want is to be heard and respected. And most of the time they will pay more for that, especially when it is in such scarcity such as today in the banking world.

As the music industry found out ... there will be other options.

CoCreatr

Wow, "70% of consumers don’t want a relationship with their bank", that would mean a customer satisfaction index not so far off from the tax office. That also indicates a fair business chance to capitalize on value not currently tapped for institutions, organizations, or professional networks that, um, "get it".

On the other hand, I do not get this in the DeLaRue report:
"only 31% of retail banking consumers say they are highly receptive to the idea of developing a relationship with their financial institution."

What the study seems to say is that customers more satisfied with the service respond more affirmative to the question of building a relationship with their bank. Of course that's the #1 objective if you consider lifetime value of a customer and the cost of acquiring a new one.

Maybe I just take Henry Ford too seriously, “If I had asked people what they wanted, they would have said faster horses.” Yup, just, duh. If I do the Toyota thing and observe customer's interaction and experience, I see relationships. Not always amiable, not always laughing all the way to ..., but trusting well enough for earnings and more. Trusting enough to self-serve at the ATMs (I enjoy this convenience since the early '80s) and more recently, laughing all the way to the mobile banking phone.

Further down in the study,
"With all of the things that both executives and employ- ees say, one critical factor overlooked by both has been pointed out in The Frontline Experience research: neither bank management nor frontline staff have fully under- stood the consumers with whom they are attempting to build relationships."

How get better at that? Now we're talking.

Gabriel Shalom

Hi Chris. It's nice to read all the different perspectives here. I am glad you have taken the time to spark this discussion because it's clear you have a deep passion for these ideas.

I have written a new post on emergence.cc from my perspective on what could happen next.

http://www.emergence.cc/2010/11/the-future-of-the-future-of-money/

Giyom

Consumer finance is where food was 10 years ago: a caloric intake, a utility. People assume it's good for them: "if it was bad, surely the Government would do something about it". People focus on the convenience of the service: "wow, I can order my food through the Internet on my phone". They are not focusing on the most important thing: the food itself. They see organic fresh food to be cooked at family restaurants as way overpriced. No surprise if no or only a few % of fast food customers want better quality food over taste and size: you can build very limited meaningful relationships on selling fast food to people.

(continuing my metaphor) food (banking) has to be rediscovered as medicine, as individual and group enjoyment, not as a caloric intake.

It took 10 years for food to get to where we are today with food in the US (basically, just the beginning). If we can avoid the equivalent of another generalized food poisoning crisis, the evolution in banking will take just as long. But the financial crisis is the banking version of obesity. It raised profound doubts in something that was thought to be secure, efficient, harmless, managed honestly, well supervised.

Like with food 10 years ago, there are *today* many small-scale examples of what consumer finance will look like in 10 years. Not everything exist today either and many new concepts are yet to be invented. And of course, the incumbents will still be around. But the change has started.

Chris Barry

Great post and comments! One thing comes to mind is that the more things change the more they stay the same.
The basic concept of money has not changed in millennia and will likely not change as a result of social media. The basic purpose will always be to serve as a secure and hopefully protected transaction mechanism of value for goods or services as Chris points out. The conduit and methods that we use to make these transactions will always change and there will always be new products and services created around them. Technology enables us to play creatively and build models to support business and social goals independant of each other or in collaboration.

Kosta

2 more cents.
I listened today to Brett King's talk at the Gartner Symposium. His key message (about Bank 2.0) is: it's not about the technology, it's about the experience. The technology is not important for this discussion, but the experience is.
In his usual bottom line good sense, Brett asks: what will a delighted customer of a bank look like in the future?
Several people try to convince Venessa (just picking on you Venessa as you, after all, are at the origin of this debate ;-) ) that banks are the well oiled back-office making the business run smooth, and that she should be happy it is so.
I tend to side with her original rant.
Somebody will get it and make people like her delighted. The question is: will it be the banks?

Annalie Killian

Chris, were you the Executive Producer on The Future of Money?

Gottfried Leibbrandt

Chris, I have to admit that I am in the camp who thinks there is (a lot) more to money and banking than the socials realize. For example, banks are more than just private ventures that channel savings to investments. Crucially, they are closely intertwined with a funny thing called governement. Let me give just a few examples of this interwining. Money is issued and backed by national governments and at the same time also a crucial instrument for economic policy, and banks play a crucial role in executing monetary policy. The fact that banks are heavily regulated and that the state stepped in massively to save the banks serves as further evidence of this. Any reinventing of money and banking will have to consider this public sector link. In a way the socials would make a good team with the Tea Party: let's do away with banks and government in one fell swoop....

Thebankwatch

Wow .. Chris your posts amaze me. Way longer than even mine!

But I am with @pragmatist. The expectations of Gen Y, GenX Bayboomers Gen blah are missing the point. Do not expect anything of banks.

Its ok to expect service, capabilities, and a better money system, but why expect banks to do that? Remember the definition of insanity ... doing the same thing and expecting a different result.

Banks with a few exceptions are becoming utilities the same way that your electricity and tap water is a utility.

This argument will not be solved at SIBOS.

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