Why banks welcome Facebook peer-to-peer payments
The 21st century is the era of embracing and sharing new technology, especially for those traditional industries such as banking.
These high street banks, where most of us hold our savings, mortgages and travel insurance are perceived as being threatened by new technology. It is true that the traditional banking sector has seen a growing mountain of formidable competitors such as challenger banks like Metro, online lenders like Wonga or new payment providers like Facebook. However, the reality is, customers do not want to leave established banks.
Promoting and delivering higher interest rates are no longer key to keeping hold of customers. In this connected world, customers are more accustomed to getting services and feedback in real-time. Although according to Avangate research, the majority of customers prefer to pick up the phone if they have a customer service question, using social media as an avenue is growing due to its real time, direct to vendor offering. Contrast the fast moving world of social media, the traditional banking environment for customers appears more lethargic.
The acquisition of customers for banks has become more difficult in this new era by the increased expectations created by maturing technologies. Banks need to step on and deliver high quality service to this “always on” attitude, otherwise customers move to a banking service provider which does. A recent survey by MobStac 2014 showed 74% of customers rely on social media to make purchase decisions. Therefore it is not surprise Facebook, following Google, has made a strategic move into payment by offering a service to potential customers so they do not have the website to make a purchase.
Motivated by the decrease in consumer trust of traditional banks, Facebook has spotted a weakness and is calling out high street banks for a fight. The recent announcement of its peer-to-peer payments feature to the Messenger platform is an act of war on banks. The social networking giant may have a large user base but will users actually trust Facebook to hold and send their hard-earned money to relatives?
Even though it may be threatening at first glance for banks, they should not lose sleep over new challengers. In fact, this is an opportunity for banks to show off what they know about their customers. The advantage for banks is that they still hold the lifetime relationship with customers. Over many years, customer data has been created and stored in the various technology systems they use. Although gaining decent intelligence from these unconnected silos of data is an issue, it is not a terminal one.
New challengers are healthy for slow-moving industries such as banking. The challenge laid out by Facebook should serve as a wake up call. Even after the financial crisis of 2008, which put some global banks out of business, they still remain the most trusted institution to handle personal data and provide the most convenient way of managing money. New technologies aren’t scaring banks right now but it is making them rethink their customer offerings in a new light. Some of the best examples of adapting new technology within the Financial Services sector are occurring within developing economies. Mobile payments such as M-pesa in Kenya is turning mobile phones into mobile wallets for 17 million people. Facebook should look no further if they want to make its latest bet a success.
There are much bigger challenges for banks to overcome in securing their future beyond the growth of upstarts. New-skool banking service providers already have an advantage as traditional players are under heavy regulatory scrutiny. So to overcome this issue, banks should only focus on the customer because that is the main reason why regulators have found their voice in recent years. Industry-specific technology can certainly help banks to recalibrate their focus on customers. Banks, due to its faulty legacy technology, are losing potential income as they do not have accurate data to know when and who they can sell new accounts and services to.
The lifetime relationship between banks and the consumers give banks the edge of over digital disrupters. The wealth of data kept internally can help account managers review current services on offer and predict what new services they may need in the future. With this intelligence, product can be created which tells customers the bank is at the top of its game.
Banks have realised they have to work harder to win customers and already dismissed the old expectation of sitting back and waiting for new customers to walk through the front door. To maintain the customer relationship, banks are going digital-first as physical branch relationships have become more obsolete.
Digital interactions between the bank and customer is the future for banks according to thought-leader Brett King who claims there has been 90 percent reduction of bank branch visits. To deliver value-added offerings in a digital age, banks in Asia and Africa are implementing strategies which combine the deep understanding of customer needs with the craved omnichannel experience modern customers demand.
Even though Facebook, Google and Twitter have spotted an opportunity to make themselves relevant in Financial Services, they still yet have a long way to go before they are trusted. It is true to say social media companies have lots of user data on what is liked and disliked, but the relevance of that is minimal when customers are looking for mortgage provider. Will being a fan of Breaking Bad on Facebook be useful when a customer is looking to lower her transaction fee?
It is true banking customers are more empowered than before and will switch providers if they do not get the service demanded. However, customers tend to go to a rival bank rather than betting on a Facebook. The lifelong understanding of customers is what sets banks above the rest of the competition. Banks already possess the meaningful data, which has not been fully utilised, on customers and this is the biggest asset. The real challenge for banks is if they will wake up and realise their potential.