Social media transforms banking sector

Banks need to embrace the digital ecosystems that are being created by social media networks, as it allows them to effectively move beyond traditional marketing and customer services.

So says Riaz Osman, Accenture's senior executive for technology and financial services, who argues that by embracing digital ecosystems, banks can establish a continuous relationship with customers based on listening to and engaging with individuals and communities in a more direct manner.

Absa's CIO, Alpesh Patel, concurs, saying the biggest threat to South African banks is not the competition posed by other financial institutions, but that posed by non-financial institutions using new technologies to reach new customers.

According to Patel, in the digital age of “always online”, instant service gratification and social media addiction by customers, banks have to innovate in order to stay relevant to the customer and maintain direct relationships.

Robert Sussman, joint CEO of ZunguZ, a local multi-tiered platform that integrates social networks, financial service providers and banking institutions to facilitate micro-payments, says global banks and financial institutions are becoming more aware of the value of social networks to extend the reach of their service offerings and to place people at the centre of banking.

The ZunguZ application facilitates money transfers between Facebook friends using the sender's existing bank account. The receiver can access the money by activating the ZunguZ application and then getting the cash from any of SA's big four banks, provided they have an account there.

Using a platform like ZunguZ, Sussman explains, a user can send R200 to Facebook friends unanimously. He adds that, for amounts over R3 500, the sender's ID number is needed, and for the maximum transaction of R25 000, a copy of the sender's ID will be required.

Sussman says ZunguZ's security functionality includes Thawte certification, SSL and HTTPS, as well as second-factor authentication.

Osman says banks are rethinking and transforming their security functions because of changing and more complicated threats, increased penetration of technologies such as mobility and social media, and the complex regulatory landscape.

“Trends such as mobility and social media are enabling easier communication with banks and easier access to bank systems, but this makes banks more vulnerable to security threats. This means that banks need to be very mindful of security and data privacy as they become part of the digital ecosystem - these aspects need to form part of a bank's innovation strategy and it will require investment in new security and data privacy capabilities.”

Osman points out that an interesting example of a bank leveraging digital ecosystems is New Zealand's ASB Bank, which has enabled real-time chat between customers and staff, seven days a week, through its Facebook page.

He adds that American Express also supports customer service via Twitter and then expanded its proposition to include initiatives.

“It offered rewards for linking customers' Amex cards to their Facebook accounts, resulting in a 30% increase in sales.”

In another initiative, Osman adds, American Express provided customised offerings to customers based on their spending, location and social media profiles via Facebook, Foursquare and Twitter.

Wells Fargo Bank has established an “Ask Wells Fargo” blog on Twitter to improve its customer service, he adds.

“There is very little that will prevent social media networks from offering banking services in the future, considering the extraordinary growth in social media adoption and the personal data that they possess on hundreds of millions of users,” Osman notes.

He also believes the biggest threat to the banking sector today is from non-financial institutions that are operating in consumer markets, for example Google, Apple, eBay, retailers and telcos.

According to Osman, these organisations have trusted brands, more frequent interaction with customers, or a differentiated customer proposition.

“It is, therefore, not difficult for them to invade the 'space' between banks and their customers. They are starting to dictate the payments solution being offered to their customers, eg, eBay and PayPal, Google and Citi MasterCard, Checkers and Capitec.

“We are seeing digital ecosystems emerge where financial and non-financial institutions are partnering to provide offerings. A bank can decide to create or be part of a digital ecosystem, depending on the payments solution and the role it intends to play.”

Accenture's High Performance IT Survey reveals that 55% of bank CIOs want to see technology teams play a proactive role in driving innovation going forward (an increase from the 22% who identify that this is happening today).

“Our experience shows there is often a disconnect between the desire to accelerate innovation and the ability of teams on the ground to deliver at the scale and pace required. In many cases, innovation is sporadic, delivered by teams that work in silos, and made too costly by legacy technology, leading to a failure to achieve targeted outcomes.”

To overcome these challenges, says Osman, Accenture believes banks need to create a robust operating model for technology innovation as part of a commitment to making this a sustainable activity.

They also need to execute a focused innovation strategy that improves speed to market. “This will require a bank to define its differentiated service and product offerings, eg, money transfers, rewards, mobile payments, mobile applications for smartphones, services on basic cellphones, etc.

“The strategy will be informed by performing micro-segmentation of its market using social and behavioural data from social media and the digital ecosystems it wants to create or be part of.”

Banks also need to empower leaders to drive a new set of behaviours and culture that will support innovation and disrupt traditional ways of working, Osman also points out. “The bank will need to adopt agile practices and processes in order to meet the rising customer expectations and declining loyalty.”

He also notes that product and service technology innovation will need to be delivered in shorter timeframes (three months or less), as responsiveness and speed-to-market are extremely important.

“Investing in a core set of capabilities, for example innovation labs, technology showcases and supporting infrastructure, are needed to drive the end-to-end innovation process. This includes a strategy to deal with legacy systems and a roadmap to adapt in the most cost-effective manner, such as using cloud computing services.”