The Financial Services Club's Blog

First Direct's Twitter Sex Hack Attack

Everywhere I go these days, I see ads for following businesses on Facebook and Twitter.  The latest was down at the local winebar where they have this ad on the counter:

 

GET DISCOUNTS IF YOU FOLLOW US ON FACEBOOK!!!!

Works for me.

Apparently, some 27% of UK SMEs use social media to connect with customers according to a survey by Virgin Media and other studies show that the fastest growing companies are those using social media to communicate.

And yet, apart from First Direct, I still can't find a blog, facebook or twitter button on any mainstream bank website in the UK.

Mind you, it may be that banks are waiting until social media's issues are resolved before they dive in.  For example, here's a direct tweet I received from First Direct this morning:

Maybe that's the reason that most banks are onthe fence about social media, as they are waiting until the hackers and underware issues are resolved before they jump into the fray.

That also makes sense to me.

UPDATE
13:00 26th February

First Direct have clarified what happened and yes, they were hacked!

 

UPDATE 2

19:00 26th February 2010

First Direct posted an apology on their website:

If you're reading this you're probably aware that at 5 am this morning first direct's Twitter account was hijacked and used to spam our followers. We'd like to apologise for the message itself (no need to repeat it) and for the way we dealt with it in the first instance.

We would like to offer you some explanation for our actions...

How did it happen?

This morning (about 00.30 am) we received a rather salacious Tweet from one of our followers (their account had been hijacked too) and whilst checking it out proceeded to read the other direct messages we'd received.  One direct message was from a trusted source it read "ha ha is this you?" and included a link which we unthinkingly clicked on. 
 
We can confirm that our Twitter password is extremely secure (a long string of randomised characters, and regularly changed), and the only reason they were able to gain access to our account was through the mistake we made.  Obviously we changed our password as soon as we realised what had happened (and we have revoked the OAuth access of the spam generator), so our account is secure again.

Why did we respond the way we did?

We tweeted quickly out of a desire to re-assure people and perhaps should have gone straight to the third of our three tweets. We should have got an apology up sooner, and we probably shouldn't have used the word "hack". Twice.
We've now put steps in place to make sure it doesn't happen again.

Have any other first direct accounts been tampered with?

Absolutely not. This was an isolated incident affecting our Twitter account only.

Final word

This is new to us and to the financial services sector as a whole. We made a mistake, fixed it as soon as possible and we're taking steps to ensure it doesn't happen again. We're very sorry, but we are only human afterall.

Innovations and snails

According to Fast Company, only one of the Top 10 financial websites of the world comes from a traditional bank.  That bank is Itaú Unibancoe in Brazil.  Well done Itaú Unibancoe ... what happened to the rest of you?

Oh yes, banks don't innovate.  I forgot.

Mind you, plenty of innovation from outside banks and my favourite upstart of the year has to be BPAY in Australia.

What's BPAY?

It's a 12-year old newbie on the payments block that has, since its launch in November 1997, become the most popular bill payment service in Australia.

Over 170 Australian financial institutions covering around 90% of the consumer banking market, belong to the scheme.  This has resulted in 18 million bills worth AUS$11 billion being paid using BPAY every month, and more than 84% of these are paid over the internet.

That's the nature of innovations like BPAY and PayPal, they just nibble away at the fringes of banking and gradually become processors with clout before you know it.

So why are BPAY in my good books?

Because they've launched a really fun website called: the World's Biggest, Most Awesome Waste of Time.

We think mindlessly flicking through TV channels at 2am, or spending the day Facebook stalking, is a pretty average way to waste your time.  Instead, pay your bills quickly and easily online with BPAY and, with the extra time you save, you could go big with your time wasting.  In fact so big, and so awesome, that you could call it the world's biggest, most awesome, waste of time.

BPAY have illustrated this with a great video of Snail Art, and this video is why they're my favourite upstart of the year so far:

They're also running this as a competition:

We're pretty keen to find out what your idea of awesome time wasting would be, so we've decided to turn it into a competition.

First prize will be getting your idea filmed by a professional production crew.

I wonder if the Baaa-Studs will enter:

 

Hattip to Banking Review

Why Heads of Innovation are actually Bottoms

Over the past year, most of the banks I deal with have dropped the word ‘innovation’ from their mantra. It’s strange but true that the focus upon being innovative had been such a focal point during the 2000s and now it’s all over.

To illustrate the point, the Top 10 American banks used the word ‘innovation’ an average 1.2 times per annual report in 2000, rising to over six times per report by 2007.

Heads of Innovation were popping up everywhere and innovation was the key to being different, attracting customers, growing business and increasing revenues.

Now the Heads of Innovation have all gone and Innovation is at the bottom of the banks ‘to-do’ lists ... in other words, the Heads have become Bottoms.

Banks have realised that the last thing they want to be is innovative.

They want to be boring.

So innovation has disappeared over the parapets as fast as Tiger Wood’s pants.

But that’s not the end of the story.

There will still be some innovation in banks. The question will be: which ones?

Let’s roll back to the beginning.

Innovation became a focus for banks because technology was moving at such a pace, and client demands with it, that any bank which was not seen to be innovative felt they would lose business.

Hence, as is the way with banks, they all appointed a head of innovation, used the word ‘innovate’ in all of their customer marketing materials, and appeared to be innovative by doing funky things like using employees to advertise the bank and giving away pens in branches.

That’s all the token gestures of innovation.

Meanwhile, some banks were actually being innovative, but just weren’t talking about it that way.

Banks such as Goldman Sachs who were creating incredibly innovative trading systems that ensure best price for their investors, which is why they get so much investment business, whilst creating huge market volatility.

Banks like JPMorgan Chase who invented the whole concept and trading of Credit Default Swaps. By being the first mover to invent and then trade these products, JPMorgan were not only the first into profits from such instruments but the first out of the losses created by them, as were Goldman Sachs.

Very clever.

Banks such as Wells Fargo meanwhile, have made it a clear focus to engage customers using social media, and see this as a differentiation in the customer experience. Rather than having a head of innovation in this area however, they instead invest in creating platforms to engage customers in remote social interactions via blogs, virtual worlds, YouTube, Facebook and Twitter.

That’s innovation, but it is not seen as token innovation but core developments in customer engagement.

For the average bank however, innovation is not in their blood.

This is because innovation demands doing things in a different way, and banks don’t like to be different. They want to be the same.

They don’t want to break away from the crowd, but want to do things in robust, proven, low risk ways.

They don’t want to be leaders but lemmings, all running in the same direction doing the same thing in a nice, safe, undifferentiated manner.

They cannot invest in something new and different, because it has to have a clear business model, financial analytics to support the investment, clear returns on investment and absolute management buy-in and commitment.

All of the above would never happen with something that is not proven, not clear, not justified, and unable to be supported by a strong financial business case.

Hence innovation lies in a heap at the bottom of the bank’s corporate agenda.

So what are we really talking about today, when it comes to innovation in banking?

We are talking about banks that create cultures of being prudent risk avoiders, entrepreneurial innovators, excellent customer engagers, aggressive market makers or active acquisitors.

These cultures sit at opposites with each other and rarely would you find a bank that could be all in one.

For example, I wouldn’t put Wells Fargo in the bracket of prudent risk avoider as they see themselves as an excellent customer engager; Goldman Sachs are an aggressive market maker, as are JPMorgan, but they probably wouldn’t use the word prudent; Citi are now a prudent risk avoider having learned their lesson of being an active acquistor; and Lloyds TSB were always a prudent risk avoider until they became an active acquistor.

These cultures are driven from the man or woman at the helm – a fish sets its direction from the head but also begins to rot first from the head – and it is the man or woman in the driving seat that creates the innovation and risk culture of a bank, not the label ‘innovation’.

That is why you can find banks that are hybrids of this model – such as Barclays where John Varley has created a retail and commercial banking operation that is prudent whist Bob Diamond runs an aggressive market making operation in BarCap.

There are other banks that demonstrate this mix, and it is purely a reflection of the management team.

For example, HSBC is a prudent risk avoider under Chairman Stephen Green and CEO Mike Geoghegan, but is also an entrepreneurial innovator thanks to Chief Technology and Services Officer Ken Harvey.

All in all, the lesson learnt for most banks is that innovation is not a function or label, but a culture and so it is gratifying to see innovation has been removed from the mantra of the banks as a label.

Now let’s see which banks create innovative cultures over the next decade, and watch them grow.

Social Media Survey

Brett King, author of the new book Bank 2.0 - which I can recommend to those of you working with social media in finance as a focus – has worked with me in the past few weeks, analysing the inital and general results from our social media survey.

Almost 450 folks responded to the survey (thank you all) and here are a few fast facts:

• the majority of the participants would participate in social media before making a decision on a financial service provider

• 93% of participants consider social networking will be worthwhile or critical for banks in the next five years

• 78% said social media is worthwhile or critical for corporate banking relationships today

• the majority of customers would go first to independent community discussions before coming to the brand itself

• Facebook and Twitter scored as the highest value social media channels for retail banking engagements

• LinkedIn, Blogs and Privately Managed Online Communities scored as the highest value social media channels for business interactions

• 74% said their use of social media organizationally will increase over the next two years, whilst only 1% said it would decrease

For the full 30-page report analysis:

Our conclusions

93 per cent of the 443 respondents to the Financial Services Club survey indicated that a focus on social media would be essential to the future of financial institutions over the next five years. Only 1 per cent of the survey group said that they feel their institution would be likely to decrease their use of social media in the next two years...only 1 per cent! All indications are that this is a hot topic for pretty much every service organization out there which is surprising as so few firms are doing anything about it!

Adoption rate of social media is scary. Two years ago Twitter was unheard of. Although Twitter started beta testing their concept in 2006, it is largely agreed that it didn’t formally launch till April 2007. Since then Twitter has taken off by storm – globally, in the USA and in Australia, Twitter ranks as the 12th most popular website by traffic, in the UK it ranks in the top 10, and in most of the EU it ranks in the top 30 or 50 websites. It took Facebook 4 years to achieve the same impact; so social media adoption is definitely speeding up, not slowing down.

Given the rate at which Facebook, Twitter and other such social networking sites have impacted popular culture, it should come as no surprise that financial service providers are starting to think about integrating social media into their business. However, the path to integration of these new media tools into the institution is a tough challenge. Firstly, organizations understand that this is an issue requiring total commitment across the organization, but achieving such is difficult because finding someone who can garner that support is a challenge. Secondly, brands in general are starting to understand that social media is a medium they can’t ‘spin’ – that is customers are largely in control – and that is worrying, particularly in the current environment where FIs are facing significant perception challenges at large.

The real conclusions of our research show that individually we know that it is inevitable that social media will be integrated into our business, but our organizations are looking for direction. The difficulty is that there is no one size fits all solution. Each of the popular social networking sites works in different ways, so we need strategies that reflect this. The survey showed, for example, that LinkedIn is a far better tool for business-to-business discussions and for promotion of services to professional individuals, such as priority banking and wealth management. For general brand marketing, Facebook is an effective tool, but our respondents wouldn’t use Facebook for banking contacts or LinkedIn for private and personal socializing. So banks must target effectively if they are to get the socialization of finance right. The strategy needs to be localized and involves pay-per-click embedded advertising as well as sponsored groups and consumer support.

Twitter as a tool is an excellent research tool. We would say that this medium in its current form would probably yearn more data than your best of breed focus groups and customer satisfaction surveys if it can be harnessed correctly. When it comes to Twitter it is all about listening. Our survey showed that consumers would use social media first to ask other customers about their experience with your brand, rather than engaging with your brand directly.

The survey shows the biggest missed opportunities for banks and financial service providers are more in respect to their own properties. Banks need to be using blogs to give more of their own voice to the social discussions, along with privately owned social networks embedded into the customer website experience. If you are not sure what privately owned social networks mean, think say Amazon’s product recommendations and rating system, PayPal’s Blog, and Wells Fargo’s Stagecoach Island?

Our survey essentially shows that most banks are missing a key development in customer engagement – both at the consumer and, more importantly, at the corporate level – by not deploying and utilizing this media effectively. For example, respondents are familiar with some of the key bank provided B2B networks, such as those from Bank of America and HSBC, but these examples are few and far between. This is the case even though most consumers and corporations feel this is critical to the future!

There needs to be an immediate and concerted effort to integrate social media into your organization today. More than that, this needs to be a cross-discipline, multi-department effort and it’s going to be difficult, but not necessarily expensive. If used properly, the bank will improve delivery, revenue and customer engagement significantly.

For the full 30-page report analysis:

LSE's marketing gets desperate

I realise that the LSE has been challenged by the new MTFs like Chi-X, which is why it has recently acquired Turquoise, but surely this sort of advertising is going to new extremes ...

Spot the Bank Ad ...

I cannot believe it!

SuperBowl used to be a great American tradition with Visa, MasterCard and a variety of other financial firms champing at the bit to get a bit of attention.

Now, in these austere times of banks avoiding advertising, not a single bank or firm in these markets fezzed up the $3 million for a 30-second slot. According to the Wall Street Journal’s blog, this year’s advertisers were:

• Audi
• Boost Mobile
• Bridgestone tyres
• Budweiser
• Careerbuilder.com
• Cars.com
• Census
• Coca-cola
• Coke
• Denny’s
• Dockers
• Dodge
• Doritos
• Dove
• Dr Pepper
• e*trade
• Electronic Arts
• Emerald Nuts
• Flo TV
• GoDaddy
• Google
• Homeaway
• Hyundai
• Intel
• Kgb
• Kia
• McDonald’s
• Michelob
• Monster.com
• Motorola
• Pizza Hut
• Pop Secret
• Snickers
• Sun Life
• Taco Bell
• Tebow
• truTV
• Volkswagen

Sure, you may say that e*trade are a financial firm, which they are, but their baby ads are creepy:

And Sun Life, an insurance firm, have their name on the stadium and splashed out big time with Cirque:

... but where were the bank ads?

There was a rumour that Bank of America was going to air this one:

... but I suppose they pulled it after last year’s outcry about their sponsorship or because it’s not really an upbeat Super Bowling ad.  Or maybe they just listened to my advice from a year ago (as HBOS should).

Jeffry at the Financial Brand spotted this one for Three Rivers Credit Union, which aired locally during the Bowl: 

Woof, woof.

But there were no ads in prime time nationally so, instead, we’re left with the rest.

Here’s a few of my favourites.

The Audi ad, ‘cos it feels this way these days:

The Intel ad, as it’s cute:

And the Doritos ad, it rocks!

See all the ads at i4u.com.

Oh yes, and congratulations to the New Orleans Saints and commiserations to the Indianapolis Colts.

Finally, via the Ridiculant and in the spirit of great puns, here's a Superb Owl:

 

The Amazing World of Social Connectivity

It's been a while since I did a numbers post on social media, but it's time for an update and there's a great supplement in this week’s Economist discussing all things social networking.

It's well worth reading the whole 20-page report but, if you don’t have time, here are the stats (always useful).

Social Audiences

• Facebook is the globe’s largest online social network with over 350 million users.
• Facebook’s audience is bigger than any TV network that has ever existed on Earth.
• Were it a nation, Facebook would be the world’s third most populous after China and India.
• 70% of its audience is outside the United States.
• Twitter had 58 million web visitors in October 2009 ... or is it 23 million?  See end of this entry.
• Facebook took almost five years to get its first 150m users, but just eight months to double that number.
• LinkedIn has over 58 million members, and it took 16 months to reach its first million users whereas the most recent additional million came on board in only 11 days.

Mobile Social

• eMarketer estimate that over 600 million people will use their phones to tap into social networks by 2013, a more-than-fourfold increase on last year’s 140 million.
• Facebook has 65 million mobile users.

Social Content

• Facebook’s users post over 55 million updates a day and share more than 3.5 billion pieces of content with one another every week.
• Over 2.5 billion photos a month are uploaded to Facebook, making it one of the largest photo-sharing sites on the web.
• Facebook has one engineer for every 1.2 million users.
• Facebook has over 1 million developers creating software for it and its online directory contains over 500,000 apps.
• Twitter has spawned over 50,000 apps, including offerings from firms such as Twitpic, which lets people post photos to their Twitter feeds, and Twitscoop, which highlights popular topics being talked about on the service at any moment.

Social Revenues

• Facebook does not reveal numbers, but its revenues last year are thought to have been at least $500m and quite possibly more, which helped it to turn cash-flow positive in mid-2009.
• Although user numbers were sharply up last year, the social-networking industry’s revenues in America, its biggest advertising market, rose only by a modest 4% to $1.2 billion according to eMarketer, a market-research firm.
• That was still an achievement, because the total online advertising market shrank in 2009 and MySpace revenues, the largest share, are thought to have fallen last year.
• This year eMarketer expects revenues to grow by over 7%.
• ComScore found that one in five adverts viewed by American web users last June ran on social-networking sites, with MySpace still accounting for the biggest chunk of the total.

Social Games

• In 2008 Tencent, the Chinese ‘Facebook’ which runs QQ coins, listed on the Hong Kong Stock Exchange and reported revenues of just over $1 billion, with $720m coming from online gaming and sales of items such as digital swords and other virtual goods.
• Ning, another social networking tool, is targeting gifts rather than games and launched an initiative in October 2009 that allows people to sell customised digital items to their members. These cost anything from 50 cents to $10, and over 400,000 are being exchanged every month, splitting the profit equally with its customers.
• In the game “Sorority Life”, users complained about the lack of virtual men to date so Playdom quickly introduced some last November – some 10 million of the boyfriends were promptly snapped up with a few players buying as many as 500 boyfriends each; some paid for their digital darlings with virtual credits won in the game, but others stumped up over $5 a time for their beaux.
• Although Asia remains by far the biggest market for digital knick-knacks, Inside Network, a research firm, has estimated that sales of virtual wares in America on many different kinds of websites reached $1 billion last year and could grow to $1.6 billion in 2010.
• ThinkEquity, an investment bank, reckons that revenues in America from social games could hit $2.2 billion by 2012, a big leap from last year’s $375m million.
• “The best virtual goods have real currency,” says Mark Pincus who runs Zynga, on eof the biggest gaming firms on Facebook.

Social Marketing

• A survey of 1,000 heavy users of social networks and other digital media conducted in August 2009 by Razorfish, found that 44% of those following brands on Twitter said they did so because of the exclusive deals the firms offered to users.
• One in five tweets mention specific brand names in the updates.
• O2 found that 17% of Britain’s small businesses were using Twitter to attract new customers and some believe they have saved around £5,000 ($8,000) a year from other forms of marketing by doing so.

Social Hiring

• US Cellular, a telecoms company, says it saved over $1m last year by using a LinkedIn system that produced good candidates for its jobs faster than traditional recruitment channels.
• A survey by CareerBuilder.com of about 2,700 executives in America last year found that 45% of them looked at job candidates’ social-network pages as part of their research, and more than a third of those had unearthed information there that put them off hiring someone.

Social Not-working

• A survey of 500 small businesses in America conducted by Citibank last October found that most of them had not used online networks at all because they thought they would be a waste of time.
• Morse estimate that personal use of social networks during the working day was costing the British economy almost £1.4 billion ($2.3 billion) a year in lost productivity.
• Nucleus Research, an American firm, concluded that if companies banned employees from using Facebook while at work, their productivity would improve by 1.5%.
• A survey of 1,400 CIOs by Robert Half Technology last year found that only 1/10th gave employees full access to networks during the day, and many were blocking Facebook and Twitter altogether.

If you like this sort of thing, then please join our survey on social media in finance.

Click to take the survey: https://www.surveymonkey.com/s/NXWW2B3

The survey is closing very soon, so feel free to join the 425 professionals from banks, corporations, consultancies, governments and the professions who have responded so far.  Results published at the end of the month.

Meanwhile, if you like this sort of thing a lot, then here’s a few more social media numbers, this time from this year’s World Economic Forum (WEF):

• WEF reached a worldwide audience of 430 million readers online through the use of social networks this year.
• Facebook ran real-time pulses, polling over 200,000 people and bringing their views into the discussions.
• WEF has over 6,300 fans on Facebook.
• Webcasts of public sessions on Livestream reaching a cumulated audience of over 210,000 viewers.
• News conferences were seen by over 70,000 people, and they could put questions to panellists via Twitter and Facebook.
• Over 250 participants and 120 journalists continuously sharing their impressions on Twitter
• A Twitterwall allowed participants to see a running micro-commentary on the meeting as it progressed.
• ‘Davos’, ‘WEF’ and ‘WorldEconomicForum’ were mentioned 30,000 times on Twitter.
• 1,551,130 people are following the Forum on Twitter (http://twitter.com/davos)
• The Davos Debates on YouTube (http://www.youtube.com/davos) have been watched over 600,000 times.

 

UPDATE: I ran a competition related to this entry asking folks to say how many visitors went to twitter in October 2009.  The Economist had the figure 58 million but the winning entry sent me this from Usuable NZ:

In October 2009, unique visitors numbers were:

1. Facebook = 128,940,004 (+188.67% from 1 year ago)
2. Myspace = 49,903,567 (-9.18% from 1 year ago)
3. Twitter = 23,042,455 (+577.92% from 1 year ago)

Lies, darned lies and statistics!!

 

The Financial Services Club is sponsored by:

 
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Does PR matter for financial firms?

Just found a survey in my inbox today from Broadgate Mainland and the Financial Services Forum. The survey asked 89 folks in mainly UK financial services firms – 52 in PR and 31 marketers - about their views on the measures for evaluating public relations.

What interested me is that in measuring broadcast coverage, 51% of survey respondents said that they did not measure it. What a cushy job they’ve got!

Those that do care most about audience size and half of survey respondents measured or evaluated coverage across social media through free alerts or RSS feed such as Google or Social Mention. Interestingly, half of the survey respondents are not satisfied with the tools they are using to measure social media.

Surprisingly, increasing web traffic enjoys mixed importance across the financial services sector. It has become a key priority for PR campaigns over the last year in one third of respondents’ eyes and for half of all respondents it has also become more important to appear on key web sites. In contrast ensuring high search engine visibility was classed as one of many priorities by around 35% of respondents and 33% said it was a growing priority. Almost three in ten respondents said it was either a low priority or not a priority.

You can download a full copy of the survey here if interested: Download Broadgate_Mainland_and_Financial_Services_Forum_Evaluating_PR_Survey_2010

David vs Brick Wall: How Banks are Sticking to Customers

Mint’s blog, a must-read for all bankers if you want to know what consumers top of mind priorities are, sent a post out yesterday titled: “David & Goliath: How Customers are Sticking it to the Big Banks”.

It immediately caught my attention because the Huffington Post in the USA has been promoting the idea of switching banks, as have others such as the Guardian and more.

The Mint blog caught my attention as it quotes extensive research reports, including that of UK website the Money Stop from March 2009, which advises that consumers are “withdrawing billions due to poor returns” on their savings accounts.

In the USA, they cite a Reuter’s survey from May 2009 which finds that “Only 35 percent of customers polled said they are highly committed to their retail banks, down from 37 percent in 2008 and 41 percent in 2007.”

It then moves into analysing the Huffington Post campaign to Move Your Money, which has apparently resulted in millions of dollars moving from large Wall Street Banks to small credit unions. Only running for two weeks, the campaign already has over 26,000 Facebook fans, with daily Web traffic tripling “on the National Association of Federal Credit Unions’ CULookUp.com, a credit union locator site” according to Financial-Planning.com.

The Mint blog entry is worth a read, as is the Huffington Post where “Glenville-based Trustco Bank has seen a surge in business ever since the Move Your Money campaign began calling for consumers to stop lining the pockets of the too-big-to-fail banks and to support their local community banks. Trustco saw 30 new accounts opened in one day, including one worth seven-figures.

Some people challenge this campaign, saying that moving money from a bank that is too big to fail to a small bank that can be allowed to fail is stupid, but it all makes good media news.

The trouble with all of these campaigns and discussions is that it does make good news stories but little changes in reality, as blogged about before.

Do I have any proof?

Actually, yes I do.

The UK Office of Fair Trading has carried out a range of analyses (pdf) on the UK Personal Current Account (PCA) – the equivalent of USA deposit account – situation over the past eighteen months and their last report, October 2009, states the following:

“The £8 billion PCA market is the cornerstone of the UK's retail finance system and an essential service for 90 per cent of adult consumers. However, the OFT's market study concluded that the PCA market was not working well for consumers. The OFT was concerned that a combination of complexity and opacity made it extremely difficult for individual consumers to know how much their account could be costing them compared with others on offer. This, together with perceived difficulties in switching, had led to very low switching rates and thus reduced incentives for banks to compete on price or provide new products and services.”

And calls for more transparency of charges and easier access to switch accounts.

Without a regulatory change, then things will continue to stagnate. For example, here’s the stats for current account market share from 1996-2001 as discovered by FSA across four key groups in the UK:

– Big Four: Lloyds TSB, Barclays, HSBC/Midland, NatWest
– Building societies (present and former)
– ‘Direct’ banks
– Other banks (BoS, RBS, medium & small banks)

So, the share of all current accounts was concentrated in four banks in the last half of the 1990s, with a slight decrease over that time.

Ten years later, RBS owns NatWest and Lloyds has acquired Halifax/BoS.  The OFT report (pdf) states:

“The PCA industry is moderately concentrated, with the four established banks representing a combined share of 65 per cent of all current accounts (increasing to 84 per cent with the inclusion of HBOS and Nationwide).”

Take out the Nationwide in other words, and the Big Four banks have actually increased their stranglehold of the UK’s core banking sector significantly over the last decade.  That is even with millions of discussions of bank switching and issues with service and charges.

This will not change without regulation, even with all the media promotion to switch accounts, and yet the conclusion of the OFT’s October report – to deal with bank charges – was a case lost in November.

Net:net - banks are not only too big to fail but they’re also too big to mess with, and I suspect that Barack Obama and Arianna Huffington will find this to be the case with taxes and impacting market share.

Halifax's marketing is the worst I've ever seen ...

Every time the new Halifax ad comes on the box, I cringe ...

Now I’ve blogged about their awful advertising before and how insensitive it seems post-crisis, but this one really gets me down.

Not only is it cheesy, poorly executed and raw, but it actually makes most of the folks I talk to feel sick to see a bank that has cost billions in bailouts advertising as though nothing has changed.

And I’m not alone as the Telegraph decided to run a page last week asking what readers thought about a bank that offered a reward of £5 as long as you depsoti a minium £1,000 per motnth.

This advertising seems a bit rich, the Telegraph claims, when this particular bank has cost each and every family in Britain £5,500 to bailout in the last two years.

Steve Griffiths, director of brand and customer marketing for Halifax, says that their new advertising campaign focuses on "the core message that Halifax rewards its customers for their business and shows that our colleagues are enthusiastic, friendly and approachable".

The Telegraph’s readers say:

“Never mind the advert, I want my £5,500 back. I need it more than they do.”
Polly

“Who ever authorised this at Halifax needs stringing up for crimes against society!”
Paul

“Look closely and it really does show them up as a bank that cant be trusted.”
Simon Hawking

“Rather than coming across as "friendly and approachable" they come across as a load of immature bumbling morons.”
Dave

"If they changed the tune to 'sorry seems to be the hardest word' then maybe, just maybe, there might be some mileage in this. Talk about misreading the mood of the country."
Jeremy

There's a few amusements in there too, such as (excuse grammar):

"With lyrics like 'you're indestructible' (HBOS was considered 'too big to fail') and 'you've got the power to return' (thanks to a government bail-out), was the advertising agency having a sneaky dig at its clients by any chance?"
Ian

“At least it answers one question - what banker do to deserve such large bonuses. They have to work with the inane idiots that feature in the advert.”
Mike

“Stop knocking these ads. It gives me valuable exercise reaching for the mute button. Let's have more ads like it and I could achieve fitness and a Zen like calm during commercial breaks.”
Tim

Most worryingly for Steve Griffiths, director of brand and customer marketing for Halifax, should be the comments that read:

“I bank with the Halifax and this advert makes me want to leave them. It is that annoying!”
Phil

“Absolutely atrocious! Maked me want to change my bank!”
Jonny

“I am embarrassingly a Halifax customer, but not for long, I couldn't handle people knowing I bank with such morons, & that's not counting the £39, they charge you for an email for a £2.50 failed payment.”
Caz

“What the advert doesn't mention is the £12.50 per month which they charge you just for having the account, which of course does include the overdraft charges of £1 per day, the £1.50 per month 'debit card fee', and anything else they can think of to sting you with.”
Peter

“If you already bank with Halifax, and don't have a reward account, open one and just transfer £1,000 straight in and back out each month to get your fiver, you don't even have to do it in one lump sum, just £200 backwards and forwards 5 times, still counts, it's easy if you bank online.”
Ian

Message to Halifax: start advertising with honesty and sensitivity, and stop advertising as though the great British public are numbskulls believing that nothing has happened.

What the Halifax should have done ...

Thinking about the Halifax’s ads a bit more, some may say: “they are so bad, they’re good”, in a Shake & Vac sort of way (one of Britain’s most memorable and iconic ads – see end of blog entry if you want to see it).

I disagree.

The Halifax ads are just plain bad and have been well past their sell-by date for a long time.

For example, Delaney Lund Knox Warren & Partners (DLKW) won the Halifax account ten years ago and has run the "cast of characters" campaign – the one with staff members such as Howard – ever since.

Ten years is a long time for any campaign, particularly a cheesy one that has seen the bank bankrupted two years ago and now trading under new ownership, 43% of which is taxpayer funded.

So what should the bank have done?

How about a bit of honesty?

Run a campaign called: “we’re sorry”.

Get a serious but consumer liked presenter, such as Martin Lewis the consumer champion, to front it.

We may not like him, but the public do and they trust him.

So pay Martin a big chunk of money, or someone like him, and get him to be a talking head.

Then I would script him to say something like:

“The credit crisis has affected everyone, and the Halifax has been a part of that. They are sorry about this and, to recognise their gratitude to their customers they are rewarding every customer with a £5 payment for making a deposit of £1,000 each month. This is to reflect the fact that they have changed. They thank you for your continued support and guess what? I think they are OK, so give them a try.”

Something far more genuflective, like this, would be received so much better than using a ten year old, tired campaign that demonstrates that Steve Griffiths, director of brand and customer marketing for the Halifax, just isn’t doing his job properly imho.

Postnote #1: here’s that Shake & Vac ad. It ran from the late 1970s and is still remembered by most UK adults word-for-word. Enjoy!

Postnote #2: if you want to know the Top 10 most annoying UK finance ads ever according to the Times, here they are

Postnote #3: if you're interested in the ads we liked a lot, then here's our top five from 2009.

Over half of UK's internet users bank online

As if to support my contention that a NEW bank should focus upon offering the world's best remote channel banking, the Payments Council released the following press release today:

"It is just 12 years since internet banking began, but its popularity has grown so much that, in the first half of 2009, 22 million adults used internet banking on their main current account.

"This means that for the first time ever more than 50 per cent of regular internet users (41.4 million) are banking online.

"The number of people banking over the telephone has declined to 14.5 million from a high of 16.1 million in 2005, as many of us have found it more convenient to switch from banking over the phone to the internet.

"Last year 26.8 million adults used at least one of online or phone banking.

"The most popular tasks that people who bank online carry out on their main current account are checking account balances and checking statements, used by 95 per cent and 83 per cent of users respectively.

"Phone banking still remains a popular way for people to enquire about their account, with more than six in ten phone banking customers using the service in this manner, compared with less than two in ten people doing this who bank online."

A good time for a new bank?

One of today's headlines states: the time's right for the bold to enter banking.

I agree, but based upon what I see happening right now, there's very few people being bold.  They are just following the same old way of doing banking business.

For example, call me a party pooper or something, but I cannot believe all these people who think they can make a difference to retail banking by opening up a retail bank with branches.

Why would you open a bank in the 21st century based upon branches? No-one goes to a branch except to deposit a cheque. And cheques are dead by 2018, so the only reason you’d open a bank today is to open one without branches surely?

And yet Virgin, Tesco, Metro and the Post Office are all opening new branch-based banks.

Is this madness or is there a logic to this madness?

Well obviously, there is a logic and that logic, as put to me by all banks and bankers, is that the #1 area for any account opening activity is through the branch network.

Remote account opening just does not work.

So what are the new banks, and particularly Virgin, Tesco and Metro, thinking?

Well each has a different challenge, the first of which is to get a banker’s licence.

Banker’s licences are like gold dust, subject to rigorous vetting and requirements for strong executive credentials and balance sheet approvals.

For example, here’s some words of gravitas from Thomas Huertas, FSA Director of Banking, in June 2008:

In light of the protection afforded to deposits and the trust that the public should be able to place in banks, any institution or person seeking to own or manage a bank must demonstrate to the authorities that it or (s)he is "fit and proper". Banks receive a license to take people's deposits, and the authorities need to be sure that they are granting that license to someone who will not simply take people's money. For this reason, those seeking to control a bank must meet what the Financial Services and Markets Act  terms "threshold conditions" -- that they have the integrity, financial and managerial resources necessary to run a bank, that they are worthy of the trust that people expect to be able to place in the bank that holds their deposits and, in many cases, their life savings. Banks and their controllers need to meet these threshold conditions at entry and on an ongoing basis.

You would think with such stringent requirements that banks could not fail, wouldn’t you? And they wouldn’t, were it not for global markets and complex derivatives that simplistic bank executives did not and could not understand ... but that’s another story.

The result is that, due to the recent bank failures, it is actually far more difficult now than ever before to get a banking licence.

This is why Metro has taken so long to gear up for launch – jumping through the regulator’s hoops to get their licence – and why Virgin has acquired a bank in order to get theirs.

So you get a banking licence ... what next?

Create the internal infrastructure, choose a core banking platform, deploy staff and plan launch.

All sounds so easy doesn’t it, but it isn’t because each strategy demands massively different approaches.

If you are growing organically for example, then you can choose a fresh technology platform and fit your business to the platform; whereas, acquiring another’s existing infrastructure through buying a branch network, implies massive conversion and transaction costs, not just for the systems, but also the training of staff and organisation.

The latter challenge is what the Santander’s and Lloyds’ are going through right now where, in usual fashion, the acquired bank’s organisation is transitioned onto the acquiring bank’s infrastructure. This means that all the staff in the acquired bank have to be trained in the acquiring bank’s systems and processes. That is no small task in itself and, for a Virgin who are likely to acquire branches from Northern Rock, Lloyds and RBS, this will be a core challenge in their approach.

Growing organically may also sound worthwhile as you can begin with a totally greenfield approach, but this also has issues. For example, Metro Bank intend to grow organically to over 220 branches by 2020, starting with four flagship branches this year. But 220 branches is still a far cry from 2,200, which is the sort of branch density each of the Big Four incumbent banks claim.

Even acquiring branches may not give fast results. For example, if Virgin acquires Northern Rock they immediately gain 70 branches (and £19 billion in deposits and £10 billion in loans) but 70 branches is peanuts, as Santander have discovered.

That’s why Santander acquired Bradford & Bingley’s (B&B) and Alliance & Leicester’s (A&L) branches over the past year to add to their Abbey franchise.

The result is that Santander now has over 1,000 branches and are ready to compete against the Big Four – RBS, Lloyds, HSBC and Barclays – across the UK.

So, we have a Big Five. Add on National Australia Bank, Nationwide Building Society, the Post Office and you could claim a Good Eight.

Virgin and Tesco make that a Decent Ten.

Ten Decent Banks competing on the high street for our banking business.

And the UK authorities claim there is no competition here, when most markets are dominated by just two major players?

Admittedly, today, there are only four real powerhouses here but there is room for another one and, of these, the ones that I would be most alert to are Santander and Tesco.

Santander because they’re a bank, so they join the incumbent four.

Of the new boys, Tesco is the one that should have the greatest opportunity to shake things up.

Why?

Because Tesco already have the branch infrastructure and experience.

Like Virgin, Tesco has been marketing personal financial products since the mid-1990s but, unlike Virgin, Tesco has over 2,000 branches. Physical stores. Distribution outlets.

This is why Tesco reject the need to buy branches: “the only reason to buy a lender such as Northern Rock, or any offshoots of either the state-backed Royal Bank of Scotland and Lloyds, was to buy a well-known brand, existing customers and a branch network – and Tesco did not need these.”

Tesco are also a full service retailer, unlike the banks, and – as discussed recently in this blog – they have a really strong, intimate, customer analysis and relationship management system for selling and cross-selling.

So, of all the new players, Tesco are the gorilla in the room.

They can not only offer better rates and products than incumbents based upon interest rate churn – just use their cash pool* – but also have the experience, brand and distribution network to win.

For these reasons, if I were opening a new bank in Britain today, the last thing I would do is create one with a branch network.

There are too many of them out there and little reason to change.

Instead, if I were opening a bank in Britain today, I would build a really strong internet-based, mobile and call centre focused operation, leveraging social media and networking.

But then I’m biased (as everyone who reads this blog knows).

* As demonstrated by this comment from Steve Perry, executive vice president of Visa Europe:

“Why do you think supermarkets introduced cashback ... it's because they want cash out of the system so there is less to manage.”

Battleground 2010: Sharks versus Gorillas

After West Side Story, the Sharks got over the Jets and are now targeting the Gorillas.

Actually nothing to do with music or film, we’re talking banks.

Back in the 1950s you had large banks (Sharks) being run around by small banks (Jets) who were nimbler and quicker ... so the large banks acquired them and the Sharks became Gorillas.

Now we have large banks that are strong (Sharks) running rings around large banks that are weak (Gorillas), whilst the small banks (Jets) still run circles around both of them.

What am I talking about?

Bank’s competitive strategies for the teens (2010s).

Today, we have three camps of banks:

• those that are major universal / regional banks with strong balance sheets;
• those that are major universal / regional banks with weak balance sheets; and
• smaller, independent or mutual banks with a major customer focus.

It is clear who falls into which camp as the first camp are those cited in the major surveys as being expansion banks like Santander, JPMorgan, HSBC, ICBI; the second camp is the bailout banks like Bank of America, Citibank, RBS, Lloyds, Fortis; and the third are the credit unions, mutuals, building societies and sparkassens.

What is intriguing today is the strategies that each camp will take.

For example, if I were a shark then I would look to acquire strength by buying weakened banks and by offering 50 basis point discounts on my savings and loans products.

No-brainer, and exactly what Santander has been doing in buying cheap banks assets that are positive to the balance sheet – deposit holders, branches, savers and prime rate customers from Alliance & Leicester and Bradford & Bingley.

Thing is that this puts a strain on the conversion process for integrating merged systems and infrastructures, as demonstrated by some of the poor reviews of Abbey which may ripple over onto A&L and B&B.

Equally, it places spotlight firmly onto the account opening, client onboarding and customer acquisition processes, as these banks firmly focus upon gaining market share.

The result is that the Sharks will be investing big time in M&A platforms that are open and easy to develop and evolve, whilst shining internal energies on re-engineering the client onboarding processes to make them as simple and effective as possible.

Which leaves the back-end customer retention processes exposed which is where the Gorillas will be making their investment.

A Gorilla has little opportunity to grow new customer share, as they cannot offer the rate churns that the Sharks will be putting into play. As a result, their focus has to be upon customer retention and share of wallet.

Cross-sell ratio, product margin, incentives to invest more will all be priority for a Gorilla as they aim to strengthen balance sheets. Loans and leverage? Maybe not. Give those to a Shark or even to a Jet.

The nimble Jets are the credit unions and mutuals of this world. They grow and gain business by “not being banks” and they focus on customer needs because their customers are not customers. They are members. And the Jets are not profit-focused, but member-focused. As a result, many of them will do whatever it takes for the customer, and naturally offer very competitive interest rates and strong member (customer) retention processes that promote advocacy and loyalty.

So there we have it.

The Gorillas are snuffling about slowly, whilst the Sharks cut a dash. The Jets are diving upon both and sometimes winning, but it’s no big deal as the Gorillas and Sharks are still dominating the scene.

All of them have a singular focus however upon customer and customer processes.

They all are trying to excel at the customer process of onboarding and retention.

Their focus just varies dependent upon their theme for competitive activity.

Mind you, we shouldn’t forget that we also have the Vampire Squids, as Goldman Sachs are now known, which is why we end up with movies like this ...

... nothing like the Sharks versus the Squids versus the Jets.

The Top Bank Ads of 2009

Various sites rate banking ads in different ways.  Here are a few of my favourites this year.

Probaby the one that garnered most attention from a traditional bank is this one from Barclays:

... immensely popular for some reason.  

However, most ads have been from mutuals and credit unions, having a cheap shot at the banks for obvious reasons. For example, here's a good one:

Then there's the ad series that gets all the plaudits. The series was created for the launch of Ally Bank, a division of GMAC, in the USA and uses children to illustrate the ridiculous terms that banks sometimes impose. 

Here is an example:

My favourite of these style of ads this year has to be this one from Associated Credit Union however:

Oink, oink!

Finally, there are the more "in your face" ads which was clearly won by this Aussie one from Virgin Money:

I just hope I'm as interested when I get to be that mature.

Happy New Year to all of you, and the blog's back up and running on Monday.

Apple through the years

Nothing to do with banking except that, as readers know, I am fascinated by how technology changes our lives and particuarly our relationship with each other and with our money.

Right now, the biggest innovation appears to be the iPhone and iPhone apps.

Only two years old, the iPhone has stormed the world and Apple is the innovator.

Gartner estimates that the Apple iPhone accounts for 17.1% of global Smartphone sales in Q3 2009, just behind Nokia and the Blackberry by Research In Motion. Apple shipped 7 million iPhones in the third quarter, whilst the Smartphone segment of the mobile market is growing 12.8% year-on-year .

Mind you, if the world's most sophisticated market - Japan - is anything to go by, things will become even better for Apple soon.  Take this news from 9to5mac:

Apple is big - really big - in Japan, where the iPhone now accounts for 46.1 percent of the smartphone market, according to the latest data from Impress. The company achieved sales accounting for almost half of the entire Japanese smartphone market across 2009, the analysts said. This drove the company’s iPhone 3G and 3GS to claim the top two slots in the sales charts, with the 3G model seizing 24.6 percent and the 3GS grabbing 21.5 percent.

So I was interested to see that Silicon.com had assembled a list of Steve Jobs speeches through the years, as Apple announce innovation after innovation, each a landmark of its time.

First, there was the Big Brother launch of the Mac way back in 1983 ...

Then there were the hard times after Steve Jobs left.  He returned in 1997 and committed the heinous crime of agreeing to partner with arch-enemy, Microsoft.  It did not go down well ...

Back then, Apple was struggling badly.  The origins of Apple today were seeded however when the company launched the new generation of Apple computers in 1998 with the iMac ...

And then the unit they probably did not realise would make Apple the most innovative and successful of technology firms was released into the world in 2001.  The iPod ...

Followed in 2007 by the iPhone ...

Now,the iPhone and iPod, along with iTunes and the iMac, have made Apple a powerhouse of technology innovation and leadership.

 

 

Source: MacWorld (latest Quarterly results here)

Can they keep it up?

Sure.

Have they made mistakes.

Sure - has anyone used the new iPod shuffle, the G4 Cube, a MacBook Air?

Will they maintain their position. 

As long as Steve Jobs is at the helm, it seems certain, although his abilty to stay at the helm is not so certain.  Equally, if we remember that the Wilderness Years almost bust the company, that was due to Steve's departure.

There needs to be a succession plan here ... and many cannot see one yet.

Nevertheless, if you are wondering what Steve Jobs will announce in 2010, then it should be a Kindle-killer.

The Kindle is Amazon's electronic book reader which has been a real money-spinner ... but Amazon recently licensed the Kindle software to Apple for the iPhone as an app.

So here's my prediction for MacWorld 2010.  One of these ...

Mag+ from Bonnier on Vimeo.

Now that, along with Apple through the years, is a story worth telling.

Sberbank's Branch of the Future

There have been many attempts to create the branch of the future (Accenture, IBM, John Ryan ... Deutsche Bank, Barclays Bank, Umpqua Bank ...), and so I was intrigued to hear that Sberbank in Russia had made a major investment in creating a flagship branch in Moscow.

I meant to drop in during my recent visit, but didn't have time, so I was pleased to catch the announcement of the branch opening this week.

Although it may look, on first impression, like a normal branch ...

With the lobby loaded with automated self-service machines, as you would expect, there are a few surprises.  For example, self-service contactless and remote advisor machines ...

And then, as you go into the advisory banking area, you get a totally different look and feel ...

With self-service advisory stations and 3D virtual advisors ...

There's also a major 'relaxation area', with coffee, magazines and games for the children.

The branch is also loaded with technology, including biometric pass identification where customers are scanned through the branch security systems using a special card.  This means that staff are aware of who is coming in for advice in advance through the facial recognition system.

The branch was designed by Fitch and, according to Sberbank President Herman Gref, will service customers in as personalised a manner as possible.

This is why the bank plans to open twenty branches of this type across Russia by September 2010, with all branches converted by 2016.

Sberbank is the largest bank in Russia with over 19,000 retail outlets, so that's a major challenge and significant investment.

Worth watching.

*

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Your next employee (Part Two)

Back in August, I blogged about the new generation of employee.

This week, I joined a presentation with JP Rangaswami to talk about the impact of technology on our lives, and the subject of Gen Y and the new generation of staff came up again.

For those of you who don’t know JP, he describes himself as “an accidental technologist” and is known by folks like me as a bit of a thought leader when it comes to future tech.

JP will be addressing the Financial Services Club next February and, to give you a flavour of his thinking, I’ve given his speech a mashup with my own thoughts and thought it worth sharing here.

How is technology changing our lives?

In the 1960s, technology focused upon delivering structured information to the internal consumer via mainframes.

In the 1980s, technology had moved to producing structured information for and between internal consumers via minicomputers and PCs.

By the 1990s, technology had developed into delivering unstructured information to any consumer through the worldwide web.

And today, technology focuses upon the production of unstructured information for any consumer using social networking.

In other words, we have moved from structured to unstructured information, and from company usage to anyone using technology.

The future will be one where unstructured information used by anyone on the planet will be related and analysed, so that information becomes intuitive.

The thing is that this changes our thinking dramatically. For example, the millennial (also known as the Generation Y or Gen-Y, and born between 1982 and 1995) is now our mainstream new hire employee, as they're in their 20s now.

This generation has grown up without ever wondering where technology came from or how to use it. They are not considering technology to be magical. It is just there.

That is why our generation talk about digital cameras; they just talk about taking a picture on the mobile.

Our generation talk about taping things; they just TiVo.

We talk about having to call someone; they Skype.

We talk about sending a letter or email; they just text and message.

We arrange a social evening in real worlds; they meet virtually.

The new workforce use technology at home that is far better than the technology you give them at work, and telling this generation to use your office systems is a bit like trying to force them to wear an office uniform.

It just doesn’t happen.

Their systems are as personal to them as our clothes are to us.

You cannot define their work tech, and separate it from their home tech.

That just does not work.

Equally, they have no idea about backup, security, structure and performance of technologies.

They just know it’s there and it works.

When it doesn’t, they dump it.

This generation does not worry about passwords.

If they get locked out of their account, they just create another one.

And this generation would not imagine paying $10 for a CD and yet won’t think twice about paying $5 for a ringtone.

This generation is one we have to cater for and to think differently about.

Our lack of understanding about the future and future generations is why we get so many predictions wrong.

Back in 1990, when we asked who would be the most likely new competitors to banks, it was Microsoft.

In 2000, it was Tesco.

In 2010, it’s Google or PayPal.

The thing is that each time we make these forecasts, we base them on who has critical mass at that time.

The trick is to see the emergent players, not the emerged.

The trick would be to see the Microsoft in 1980, the Tesco in 1990 and the PayPal in 2000; not ten years later.

And our competitor of 2020 is most likely small beer today, such as Spare Change on Facebook or Twollars on Twitter.

That’s why some companies get the future faster than others.

For example, BT has 16,000 employees on Facebook whilst IBM has more.

Is this wasting their time and ours?

No.

Why?

Because the company that has the most employees using Facebook is Goldman Sachs.

Goldman Sachs must have a reason for encouraging this.

They have 22% of their workforce using Facebook to share knowledge (I’ve not been able to substantiate this number by the way). There’s something in that, and we should all consider the impact this is having on their business, organisation and competitiveness.

Similarly, we talk about the fact that having millions of customers, but that’s not ambitious enough or relevant enough.

For Facebook, Google and their kind, 17 million is a beta test, so we have to be more ambitious.

1 million is a trial, 10 million is a test and 100 million or more is when the game begins.

In conclusion, to get the future you have to watch the emergent, not the emerged; you have to watch the next generation, not the last; and you have to have grand ambitions, not incremental changes.

Think different.

Think tomorrow.

Think like a kid.

The name's Green ... James Green (Update)

Travelling around recently, hotels only seem to have English speaking news channels on the TV.  Boring.

Endlessly cycled news, regurgitated on the half-hour every half-hour (every fifteen minutes in fact).

Zzzzzzzzzzzzzzzzzzzz.

Then there's the adverts.

And suddenly Sean Connery - yes, he's still working and alive! - comes on saying, "eesh time fwor green banking".

What?

Sean Connery, the original 007, the man with a licence to kill, the hardest man on the planet at one point - oh yes, and he's Indiana's dad - is now saying it's time for green banking.

What?

What is this 'green banking' and why the hell is James Bond selling it.

Only Credit Agricole know ...

UPDATE

The ad has gotten Credit Agricole into a bit of trouble with French authorities, as Sean Connery wrote in his autobiography last year:

“Little did we all know then that (this) bonnie bank (Royal Bank of Scotland) would fail in 2008, as catastrophically as Scotland’s Darien misadventure had done over 300 years ago.

“Just as the banker William Paterson’s ambitions had caused the disaster of Darien, so had the reckless foreign acquisitions of the banker Fred Goodwin, chief executive of the Royal Bank of Scotland, wreaked disaster.

“Both had to retreat from their over-extended misadventures and both had to be rescued by the state with many billions of taxpayers’ pounds. Who are the conmen now?”

and Sir Sean took £1.2 million of Credit Agricole's money, a bank that also received £2.7 billion from the French Government in emergency aid?  No wonder the ad isn't running in France ...

*

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(Stagecoach) Islands in the Stream

I've blogged a lot about Wells Fargo's innovations in the past.

This is because they are one of the banks in the stream of innovation that comes out of Silicon Valley.  This is why they are great proponents of social media:

• Blogging: FIVE corporate blogs.
• Online video:  YouTube channel.
• Social networks:  MySpace profile for Cassie, from Stagecoach Island. 
• Facebook Stagecoach Island application and fan page.
• Virtual worlds: Stagecoach Island.

Stagecoach Island is one of their key platforms in this space.

Stagecoach Island was first piloted in September 2005 to provide financial education in a fun and engaging way.

Initially, it was piloted in Second Life but, after some issues over virtual hackers and bombers, Wells Fargo moved Stagecoach Island onto their own platform in 2006.

Three years later, it is still going, with its own community, blog and facebook fanbase.

So I was intrigued yesterday when I saw that they’ve just launched the Stagecoach Island University (the official launch was on November 30th).

What’s this I wondered?

And so I asked Tim Collins, who looks after Experiential Marketing at Wells Fargo, to tell all. I also gave him a hard time over some of the sceptics’ views on the value of these developments.

Here’s our chat:

Tim: We continue to be happy with the results of Stagecoach Island and invest in new features every year. We have tens of thousands of members and see double digit growth in membership every year. Engagement is also growing, as our session lengths are approaching an hour.

We are about to launch Stagecoach Island University, which was created in partnership with Educational Financial Services and WF Foundation. The “Admissions” module expands the Stagecoach Island curriculum to include saving for college, financial aid, tips for budgeting and information on funding post secondary education. The “University” content provides direct access to the entire young adult and adult sections of Hands on Banking in a virtual space.

To add a user incentive component and incorporate real world lessons, once members complete their university experience and pass a comprehensive exit exam, they will be eligible for a new tier of “high-level” jobs within Stagecoach Island, each of which requires the completion of Stagecoach Island University.

Chris: In other words, by completing the Stagecoach Island University examinations, users become more knowledgeable about their finances and use of money, and should be better capable of managing budgets, borrowings and investments.

Tim: That’s right.

Chris: But the sceptics out there always ask me the same questions about this stuff.

Tim: Such as?

Chris: Well, the first question would be: why would a bank keep investing in Virtual Worlds as most virtual world experiments, such as all the banking trials in Second Life, are dead and gone. Isn’t this a broken business model?

Tim: I don’t think it’s fair to compare Stagecoach Island to Second Life. It’s like comparing a private community to the entire blogosphere. Stagecoach Island is a private community with an educational purpose. Second Life has a generalist business model in a world that is increasingly specialized. They are adapting, but since their data security breach, I doubt many financial services companies will want to engage with them.

Chris: OK, even if this is worth doing, aren’t all the users young, zero profit students, or are there any real people on Stagecoach Island?

Tim: Our average age for a user is 23 years old, but we have learned that our members are much more profitable than your average 23 year old. They have higher balances, more products, and will recommend us to their friends. And did I mention their great dental hygiene :-)

Chris: Can you provide any proof points that show this to be a worthwhile venture?

Tim: I think I just did.

Chris: Maybe, but every time I mention what you’re doing to others, those are the questions I get.

Tim: I’m not surprised. Bankers are a literal audience. They want to see a direct cause and effect. If they spend a dollar on marketing today, how much will I get in sales and profits tomorrow?  Experiential Marketing is different. It doesn’t directly support the sales process. Rather, it’s the warm up act for the sales process.

If we invest the time and effort to educate consumers, whether they be our customers or not, they will think kindly of us when it comes time to doing their banking. It will make the sales process easier, and we will make more money.

We have proved this with project after project....social media as a prime example. I think you are getting these questions because many companies don’t have the patience.

Chris: Thanks Tim, and good luck with it all.

 

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