Pocket sized banks

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Victor Chavez Fernandez's picture

Pocket sized banks

313,847,465 United States habitants were counted in the most recent census. Almost the same number indicates the actual users of the biggest social media network, Facebook. Google+ has approximately 170,000,000 affiliates, the same quantity as the population of Nigeria (7th place of the most populated countries). Twitter is located in the third place. It possesses nearly 150,000,000 accounts; more than Russian occupants. In a world where the users of such tools are comparable in quantity to some of the most populated countries, and even has caused changes in the political environment, the phenomenon of social media cannot be overlooked.

The human, as a creature that lives in society, has the basic need for communication. It represents the most common way of expressing our feelings, ideas, and experiences. An enormous number of inventions were directed to improve our communication. Now, the social media is fulfilling that necessity, and it is making our environment to change, drastically. This new event is driving everything around us towards one simple concept: Mobility. At this moment, we are eager to express ourselves at any moment, at any place with anyone. And we are expecting everything else behaves the same way.

Everyone is looking forward to express their own personality. The one-kind-service made for all is no longer compatible with the modern user. The social media has started a quest for individual expression, from clothes to services, and the financial sector is not exempt. Now, products and services are considered an extension of the personality. Each consumer has different needs and demands a financial service that can satisfy them all. It must be ready when the consumer needs it in the way he or she needs it. Social media is causing an evolution, from stiff and predetermined financial services, into ever-changing and adaptive services that seek for ergonomic interactions with the daily requirements of users.

Millions of people are sharing, posting, tweeting, blogging, and commenting simultaneously. The amount of information generated and transmitted all over the world is causing a curious effect. When the people share information, they compare what other institutions are offering in other countries and what the local institutions are doing. This creates an extremely approximation of the market economy concept. The constant communication that social media is granting, causes a global awareness between users that affect how the demand behaves, and consequently, the supply. We are approaching to a real interaction between these two forces to truly obtain an equilibrium point. Now, the competition between financial institutions has gone worldwide. The run of innovative services that integrates social media has begun.

Unfortunately, the financial industry is not ready for this change. According to Social Media Survey Private Banks 2012 made by Assetinum, a Swiss investment portal, one in three financial institutions does not has a Facebook account. Just 26 banks of the 50 respond to Twitter, and only 13 added tweets about wealth management subjects.  One of the main reasons is explained by Joanna Belbey, social media and compliance specialist at Actiance Inc., “Many regulations require you to retain work papers, memos and all electronic records for seven years. […] There are more than 10,000 rules and regulations in the U.S. alone that a company needs to think about”. Besides, it exist the risk of investing for a technology today that tomorrow will out of date; and of course, the resistance of the change.

Nowadays, young people, between 13 and 24 years, spend 16.7 hours a week in average surfing the web, almost three hours more than watching TV. Considering that the population that spends more time in the web than the TV will be the future costumers, all financial institutions should pay attention in this growing segment. In a decade, all the companies that do not are up to date will not have a predominant presence in the social media. In consequence, they will be out of business. If your potential customer is not aware of your existence, certainly they will not request your services. Any institution must be aware of this.

 The financial institution, according to Corporate Insight, that stood out as best-in-class using social media is American Express. Amex success is based in the proper manage of multiple channels to keep in touch with the clients. It has an open forum focused on small business owners. As well, Amex maintains five Facebook pages to engage potential clients. An important part of the customer service comes from the interaction between the company and the users through Twitter. But, being in touch with your customer or potential clients will not be a significant advantage if you do not have innovative services to offer them. It is even more important to offer an easy solution that satisfies their needs.

Facebook application is currently available on more than 2,500 phones. This tendency points at the next step, personal devices. To offer financial services through personal devices, such as cellphones and tablets, is the perfect adaptation to mobility. An example is the new service presented in Mexico called “Transfer”. We no longer need a bank account to use electronic money. Currently, with the simple use of a text message from any cellphone, we can make transactions between other users and entities; even we can withdraw money from the ATM. This is the impact of social media in the financial services. They must find innovative solutions that adapt the service to the customer, and not the other way around. The typical bank account, the lines in the offices and the bureaucracy for the transactions are out of date. Modern customers do not want to go to the bank; they want the bank to follow them.

The fundamental business model of financial services is changing radically due to a transformation in the demand. In order to keep the pace, and even anticipate the tendencies, financial institutions must modify their plan of action. First, they should use social media to improve the customer service and detect future clients. Once they have identified them, the institutions must find the basic needs and the characteristics of the services that are preferred; for example, mobility and adaptation. With the generated information, financial institutions must create a new kind of services focusing in the important features for the future customers. Banks must be more efficient in the services they offer. Not having a predetermined matrix of products can cause a sudden increase in costs, affecting revenues.

In 1776, Adam Smith defined, among other microeconomic concepts, a property of the market economy in his book The Wealth of Nations. He described a force that seeks the harmony between private profit and public interest. This force leads every individual that intends only his own security to promote an end which was not his first intention. This power pursues for the equilibrium point between the offer of the enterprises and the demand of the costumers. Hitherto, this force was called the invisible hand. By observing the repercussions of actual phenomena, now, we can rename it the Internet.


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