What ‘Bankers’ can learn from Facebook?

Banks and Facebook are poles apart. Banking is a relatively solo activity for most people and Facebook is a social activity. Banking is associated with Economics, Finance and Maths while Facebook is associated with Text, Photos, Video, Games etc . So what can the bankers learn from Facebook and Mr. Zuckerberg?

Before we get onto what banks can learn from Facebook we will first explore why learning from Facebook is necessary for banks. Digital economy has disrupted many industries. Banking is the next in line. The rise of payment apps and services like PayPal, Square, Apple Pay, Alipay and PayTM have made bankers a little bit nervous. Payment is one banking function where startups and tech companies have disrupted the banks. Traditional banks are also in the process of being unseated from lots of other services like investments, loans, deposits, broking etc. Some services like credit cards and debit cards are in the danger of being relegated to history.

Banks are generally strong in economics but startups are beating banks when it comes to finance and commerce. The problem is that economics is the back end of banking and finance and commerce are the front ends. Without front end supremacy most smaller banks will close down because in many economic tasks the bigger you are the better it is.

Facebook is also a bank. It is a bank of our social data. It has profiles of more than a billion people. Even the biggest governments do not have access to such high profile data about citizens. Add WhatsApp, Instagram and exclude China, Facebook’s world domination is complete when it comes to social data banking. Any brand or app developer who needs to incorporate social data has to integrate its app and digital platform with Facebook in order to be useful. Facebook allows third party apps to connect and access user data after the user explicitly gives permission to share his or her data.

Facebook allows communication of various things like text, images, videos and data. Facebook scales to unimaginable scales. Facebook provides analytics. Facebook provides simple user experience. Facebook is very tough on spamming. Facebook does not provide a single monolith Facebook app. It provides various apps like Facebook, Facebook Messenger, WhatsApp, Instagram, Facebook Pages. Each app provides its own easy to use high quality experience. Each Facebook app is a verb in the user’s mind.

Banks need to see themselves as a high value social network. Banking may be a solitary activity but no banking transaction is complete without involving one or more parties at the other end. Every time I pay someone many entities are genuinely interested in that data. The receiver, the accountant, the income tax department, the indirected tax department, the accounting software are all interested in that data. Sometimes parents, managers and spouses are also interested in that data. Bankers currently are very poor in providing a way to share that data. This a very big value addition. If everything I earn comes in my bank then why do I need to file a separate income tax return.

Facebook data can be visualised in various ways. There are apps which allow Facebook data to be presented in innovative ways. Flipboard is one such famous app. Humans need visual thinking to understand boring financial data. Banks try there best to provide a way out but that attempt is like the state broadcaster trying to win from YouTube and Cable companies. It is generally too little too late.

If banks start providing a financial data banking service similar to the social data banking service provided by Facebook, banks can compete with app developers. App developers are small startups when they begin. They get competitive advantage due to user experience (UX) and visual thinking. Banks should provide secure authenticated APIs with which 3rd party services can connect. Some banks do offer such services but they are not aggressive on this front.

Banks need to unbundle their mobile banking apps. Banks need to think about user experience (UX) more than economics. Backend never saves a company if front end flies away. Instead of seeing technology as a marketing gimmick they should see it as a medium for providing happiness.

The biggest change has to be in the culture. When Facebook’s numero uno status was challenged by WhatsApp and Instagram, it bought them. But instead of assimilating both the teams within Facebook’s existing teams Mark Zuckerberg allowed both the team to function relatively independently. Today Facebook Messenger competes with WhatsApp. Banks need to learn this. Banking apps should be allowed to eat the physical branches. One bank’s multiple apps should compete with each other.

Banks due to regulations and protections provided by law have become slow. Banks in countries like India should learn to compete with apps from US and banks in US should learn to compete with apps from other countries. Here again Facebook’s approach of experimenting and competing globally will be a plus.

In the end I will like to state that I am not promoting Facebook or its founder but banks need to learn from tech giants in order to survive. Nokia was beaten by US tech giants. Taxi services were beaten by Uber and app based competitors. If banks do not learn fast - Apple, Google, Facebook and tech startups will beat banks too.