Archive for the ‘Financial services’ Category.

Europe’s Bankers say understanding customer social media data is top 2013 priority

Tweet

texting

texting (Photo credit: meanmachine_ie)

The ability to interrogate and make decisions based on consumer data from social media is a key 2013 priority for European bankers according to a survey from the European Financial Management Association (Efma) and the Fair Isaac Corporation (Fico). The survey of credit risk professionals from 27 European countries found that analysing these data to better understand consumer needs was a priority for 54% of respondents.

The results show the growing importance of social data sets in the already data-rich world of financial services. The  industry is currently in a very risk-averse period, meaning that companies are looking for credit growth primarily among those people that they have the most data on - their customers. However focusing just on your existing customers will not help you to win in the current market as customers are risk-averse too in the current economic climate - they will look for the best product for them and move banks to get what they see as a better offer.

This is where the respondents see the role of social media. Analysing data from these sources can help them to better:

  • understand consumer needs
  • predict the products and services that will see most demand
  • identify where they might find valuable new customers

In the current market, the financial services brand that most effectively integrates these social data sources alongside their existing rich data sets has the potential for a real competitive advantage. The ability to predict and tailor products and services that will attract profitable consumers.

Of course getting there will involve work, as with any activities looking to interrogate and learn from social data you first need to understand what data you have (from your own proprietary data-sets and from social and public sources) and then to explore what you can learn from these. Only then can you consider how your business might benefit and the kinds of decisions you can inform.

That financial services firms rank understanding data as such a priority for 2013 shows the value that these firms are seeing from social media - not just as a means of communication but also to inform business and marketing strategies.

Can Nutmeg crack the financial services industry?

Tweet

Nick Hungerford, CEO of Nutmeg

Last week we caught up with Nick Hungerford, CEO of the new client investment management company Nutmeg.  We think this is a business with the potential to really disrupt the investment market for a number of reasons. Firstly it is positioned perfectly to take advantage of the Retail Distribution Review (RDR), coming into force in 2013, which will make investors much wiser about the fees they are actually paying their advisors. Nutmeg offers a combination of total transparency and low fees thanks to its strategy of investing in the burgeoning Exchange Traded Funds (ETF) market.  Nutmeg has also tapped into the online banking and social media trends – offering a slick user interface and backed by investors that include Tim Draper and Spotify board member Klaus Hommels.

It was only a matter of time for social media technologies to start disrupting the financial services market and we’ve written about some of our predictions before.  We’ve seen interesting companies like Friendsurance using a peer-to-peer model  - combining social networks with insurance services - to lower premiums and Polish bank Alior Sync enabling customers to make financial payments through Facebook.

Q: What was the inspiration for starting Nutmeg?

A:  I’d been working in Financial Services for 7-8 years and I always found it remarkable that even though finance and investment is applicable to everyone regardless of wealth, private banks only deal with the extremely wealthy. Friends/family would ask me for help with investments but I would have to turn them down.  At that point I started talking to investors/smart people working in tech industries. They all said the same thing, “I want to invest online, I want a smart solution and I don’t want to pay someone too much.” At that point it became obvious there was an opportunity to disrupt the financial services industry.

Q:  Do you see a threat from other trusted consumer brands diversifying into this kind of financial service?

A:   It takes you into an entirely new regulatory arena. People often ask me, “Why wouldn’t Google or Facebook do this” but it requires a massive change to their business culture. If they start managing money they have to take on financial professionals. Becoming an investment manager is a totally different ball game. Having said that, we do want there to be more people like us, driving change in the industry.

H:  How do you encourage people to take that first step to invest and put something away for a rainy day?

There is an education curve. Nutmeg is a site you come to learn about investing, money and how to save. Then, when you are ready, you can choose to invest. We are starting with those people who are used to internet banking/investing, are familiar to other online services out there and like the user experience. Perhaps they’ve had an account with a broker but don’t want to spend so much on fees anymore.  I like the analogy of internet banking - at first it was daunting to use that service but now I never go in branch at all and I’m not alone - Britain has one of the highest adoption rates in the world for internet banking and I’m sure we’ll get there for saving and investing. We only need a fraction of the market to be a giant company.

Q:  Your educational content is key to your growth, what’s on the roadmap?

A:  We know that people care most about important financial decisions, like buying a house or car. We want to inform people of what and why we are investing in things, give them a clear monthly update in a non-obnoxious, easy to understand way so they know where their money is and how it’s doing.

Q:  You are currently investing in ETFs, could you explain that a little more to the uninitiated?

A: It’s a collection of investments that track an exchange, index or sector - so you buy a little bit of lots of different things in order to get diversification.  They are also low cost and 30 years of research proves 75% of active funds (or thereabouts) underperform and not just because of the fees. It’s very obvious that trackers and low cost funds are an increasingly attractive way to go.

Q:  Nutmeg is using social media in innovative ways to drive recommendations (offering fee discounts in return for social recommendations). How else will Nutmeg use social media to become a social business?

A:  We are looking at the sharing of ambitions and goals with friends and family and allowing for social investment.  So what if a group of friends wanted to pool their money into a fund that pays for them all to all go on holiday every year? From our perspective social media is about how we get people engaged around their money.  Nutmeg is the first to do what we do and we have a great chance to change things in the industry for the better.

3 ways retail banks could get more benefit from social media

Tweet

Three financial services social media ideasFollowing last week’s post exploring social media fears and opportunities for financial services brands, this blog post suggests three  ways that retail banks could make real, innovative use of social media to differentiate their products.

1. Social banking

Create a current or savings account with interest rates individually tailored based on a customers’ ability to recruit more members to the bank. New accounts could open with an average interest rate which increased by a small fraction each time a customer brought on a new member to join.

In the old days of member-get-member direct marketing, it was common for companies to offer discounts, gifts or value added services to customers who did the leg work in finding more customers. This model has now evolved into group buying from sites like Groupon, but there is evidence to suggest that “member get member” banking could work from Key Trade (under the control of Group Credit Agricole).

While Key Trade used a cash signup incentive, an interest based one would be a more meaningful commitment to a customer relationship and stronger motivator for recruiting new customers, particularly if interest rates could be competitive with current market offerings.

2. Social Micro Saving

Create a savings account which encourages you to micro-save via your social platforms. This could also be used to encourage micro-donation to charities. This could work quite effectively as a Facebook app which occasionally puts something into a subscriber’s news feed, reminding them to tuck £10 away in a savings account and make a small donation to charity.

Charitable donations website Just Giving noted the rise of social giving late last year and with the rise of applications like Snoball and SocialVibe, innovation is already beginning to harness the power of social donation behaviour to drive donations for charitable causes. If charitable donations can be contagious amongst social networks, it seems likely that social saving could be similarly rewarding and therefore contagious. Examples might include teams that are saving personal funds & raising charitable funds for expeditions, or groups saving towards a common goal such as holiday makers saving for a big trip.

3. Social Budget planning

Social gaming has proved itself remarkably addictive, but plenty of applications can the human desire to compete to good use. Mobile or social apps that let people compete over their personal budgeting targets could drive more careful budget planning & financial prudence.

As soon as NFC payment becomes a reality, mobile devices will be enabled to track spending both in terms of amounts and locations. If a couple, or group of friends decided to collectively budget towards a savings target, they could opt in to share how well they were performing against self-imposed goals. Personal financial data would remain private, but benchmarking against targets for lunch-time spending, for example, could earn gamers reward points & bonuses, just in the same way that FourSquare currently awards players with badges & Mayorships for check in achievements.

My purpose in exploring these ideas is to demonstrate the varied applications for integrating social media & social network behaviours with personal finance. With the growing popularity of The Co-Operative bank which offers customers a shared gains model and niche banks like Triodos offering consumer banking customers ethical and sustainable savings options, it’s not hard to imagine innovative, social financial products emerging as the financial services industry re-invents its public image.

5 social media misconceptions (and opportunities) in financial services

Tweet

Social media financial services

The financial services industry feels like it’s not ready for social media. You may think that this is due to regulatory restrictions, but there is more to it than that - and there are opportunities for the brands that overcome these misconceptions:

1. Financial services companies are worried about the risk of brand damage if they start talking with people online, because the industry’s public image is seriously wounded.

It’s easier to pretend a relationship hasn’t been hurt than to talk about the awkward feelings, but the current fraught market offers a big opportunity to re-invent the relationship financial services firms have with customers. The public increasingly favours honesty & transparency. Who dares wins.

2. Consumer banking isn’t where financial services firms make their money, so the compliance & customer service burden of “switching on” social media doesn’t feel worth the investment.

This is a false economy, because the thing that makes social media so powerful is the way it enables small groups of motivated people to influence many people, very quickly. Financial services organisations put themselves at risk by failing to establish ways to connect meaningfully with customers online as well as in branches and over the phone.

3. Senior decision makers in the financial services sector still believe that social media effort will create the burden of monitoring new KPIs based on engagement metrics and Facebook likes.

The reality is different: these metrics are meaningless for senior people in organisations of all kinds. However, low-level social media metrics can be aligned with existing business metrics, like those normally used to measure customer acquisition and retention. If social media effort is to be useful, it should contribute to existing business aims and measures, not create new ones.

4. Of all industries, the financial services sector has been the slowest to catch on that social media isn’t just a marketing channel (see: social business).

Strategic uses of social media can include improving recruitment & internal career development; enabling teams working in different parts of the world to collaborate effectively or customer-led product innovation. The key to understanding the strategic importance of social media to an organisation is to understand what separates a business strategy from a plan for implementation. A business strategy describes a way to win in the marketplace given the competition and any external forces such as regulation. In an organisation of thousands, the strategic opportunity with social media may not involve marketing at all.

It may involve discovering how many hours are wasted per working week per capita on ineffective document collaboration or customer relationship management. Let’s assume replacing MS Word or Excel document control with a collaboration tool could save an average employee 1 hour per week for 48 weeks a year. An organisation of 5,000 employees paying £15/hour would save £3.6M pa .This would be a strategic use of social media which could give an organisation a genuine competitive advantage.

5. The financial services sector is concerned about the ROI of social media investment.

I heard a great story from @benjaminellis at a conference last year:

When the telephone came into popular use by the 1930s, salesmen knocked on the doors of big businesses and said: “You’re going to need phones to talk with your customers. To enable this new kind of connection, you’ll also need a room in your office filled with expensive equipment and new secretaries to route calls. You’ll also need to create a new role for an electricity manager, because the telephone system uses a lot power.”

That must have been a tough sales job. Decision makers would have asked “We’ve managed with face to face meetings and letters for decades – what’s the ROI of this investment? Are our customers even going to want to call us?”

10 years later, nobody was asking the ROI of the telephone. I doubt any organisation in the world now works out the ROI of having telephones on the desks of its employees. It’s just the way we do business. In 2021, every organisation will use social media to talk with their existing customers and to talk with prospects, whether they work in retail, financial services or FMCG.

Which means that right now in the financial services industry, there is a significant strategic opportunity to win in the marketplace by being the first to make the move.

Photo by Richard Fisher

Why Capital One and American Express are the top financial services brands on Facebook

Tweet

Capital One and American Express are the top financial services brands on Facebook, according to a chart compiled by social media analytics tool socialbakers.

While Capital One’s Facebook page features within the top 150 brands on this list, and the American Express Facebook page is just outside it, the next most successful financial services brand on Facebook is US based direct banking and payment services company Discover, which charts at the 300 mark, saying a lot about the use of Facebook among global financial services brands.

In fact, this forms a large part of the reason why Capital One and American Express are the top financial services brands on Facebook  - it’s the fact that they are on and engaging with their audience in the first place.

Plus, as both brands are credit card providers they have the opportunity to engage their audience with content that is not directly related to the financial world, ie, topics  related to the deals they have secured with other travel and leisure brands for example, or discussing areas where their customers and prospects may choose to put the spend on credit cards, like holidays or cars.

Using socialbakers to dig a bit deeper into the content and engagement strategy for both Capital One and and American Express reveals some interesting results.

An overview (to the left) of both Facebook pages shows that Capital One has 125, 813 more fans than American Express, which, in the grand scheme of things of the total number of fans they both have, is not that much of  a difference.

However, looking at the  ”people talking about” and engagement rate levels is where things get interesting.

American Express has over 10 times the number of people talking about them than Capital One, and an engagement rate that is triple that of Capital One. In fact, as the chart below shows, Capital One’s “people talking about” rate seems to be consistently low, with little sign of improving:

What’s interesting to note is that American Express had a similar level of “people talking about” to Capital One until a staggered increase from 15th December 2011 onwards and then a massive peak, and then subsequent slower increase,  from 23rd January this year.

The reason for this dramatic climb was likely to be the Facebook status update that advance tickets to the 2012 NBA All-Star Jam Session were available to all American Express Cardmembers.

In actual fact, it’s status updates along these lines that are the key driver for American Express’ high engagement levels. They don’t post regularly, and in fact have only posted content 5 times since the start of 2012, but their status updates are carefully crafted to ensure maximum engagement by highlighting the benefits of being an American Express cardholder.

In the mean time, ever since early September, Capital One has let their content strategy dip completely and they have  barely posted anything since. Previously posting regular content, almost on a daily basis, has probably helped to keep their ranking quite high in the socialbakers chart, but I wonder how much longer this will be the case. Their most recent post, back in early December read:

And having not posted since suggests some kind of unresolved technical or social media management error. This is not a good post to leave hanging at the top of the feed and someone from Capital One would do well to look into resolving the issue and adding new content, rather than leaving the page hanging.

With only one financial services brand in socialbakers top 150 Facebook pages chart it will be interesting to note how many other financial services brands start engaging through Facebook, and whether they have the same success as the likes of American Express.