What do very active Internet users expect of social lending and banking services?
Social media business is just about brand & advertising, right? Well, here at Tieto, we think there’s a whole lot more to it. It’s about a profound change in customer behaviour driven by digital communication – and we think financial services firms should be taking a close look at what social media services can do for them.
Collaborative media is an opportunity for financial services firms. And although the banks’ traditional role as infrastructure providers is not about to change, we see two ways in which social media will have an impact on them:
- Social media needs a financial infrastructure;
- Some of the financial services will be based on collaborative technologies.
Internet users as banking customers
As the social networking phenomenon evolves, individuals have become active contributors. The public is spending more time online, connecting with peers and using new tools.
The Internet is certainly having a major influence on highly active users. But what does this mean for banking services, when customers want to have the ability to fully interact with their bank in the age of participation?
The need for 'make it work for you' banking services is born. The most significant change in banking culture relates to client interaction. Account switching costs have declined and reduced exit barriers, so clients no longer consider themselves tied to any one bank.
Customers’ perceptions of online social banking are generally positive and this is having an impact on their behaviour. Customers are calling for more tailored and targeted services. They want interactive, customisable and real-time online banking, and they want to be able to upload their own content and customise their own experience.
The introduction of collaborative web applications has played a big role in driving these changes.
Opportunities and risks
An obvious extension of consumer demand for social media products is the provision of financial services. By taking care of the payment and economic transaction infrastructure and providing flexible and secure processes for payments in social media, banks can facilitate the growth of a digital society.
There are several openings in the social finance marketplace. The most immediate is facilitating online advertising payments. Digital advertising is a massively growing phenomenon, giving consumers control over the information they want to receive. The next phase will be the growth of social lending and micropayments, a venture that often has a social welfare element.
There are undoubtedly numerous opportunities for banks to enter the new markets being created by the digital revolution, but there are also associated risks. We are already witnessing fierce competition in web payments as card issuers and specialised payment services providers build scale online.
The growth in social networking and online social lending could have important repercussions for banks. Social lending facilities operate face-to-face inside the online community. And, because no intermediary such as a bank is involved, the process is more cost efficient. However, this way of doing business does have some downsides. Banks guarantee customer deposits and pay small amounts of interest. They also lend money at higher interest rates for longer periods of time.
The question for banks then, is what is the best way to get involved in social lending?
Tieto as the business service integrator
Tieto has been working with its clients to build services to help them deliver financial services for collaborative media. Through our business consulting, process consulting and system development expertise, we are helping banks to enter the new content-rich financial services marketplace. Moreover, we provide business integration services including expertise in new business concepts, in technical standardisation and in facilitating partnerships with social lending platforms and traditional banking business.
