Big Banks & Social: To Be or Not to Be?

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No less than 8 years ago, I found myself happily making a jaunt away from the banking industry. I decided to flee a dinosaur that was slow to change.

It had all the best intentions of tapping into emerging technology – however, riddled with red tape, regulation, and rigid policy, this old and established institution had a hard time keeping pace.

In this day and age where tremendous changes in digital emerge…

the financial industry, which you’d think has wherewithall to adapt to and capitalize on the pummelling volumes of unstructured data may, in fact, be the slowest to jump on the bandwagon.

This post discusses some of the in facets in banking that challenges its steps towards embracing big data and becoming a social business.

Bank to the customer: “What have you done for me lately?”

I came from a database background. As a marketer, we fed on data results to help us define our market. We relied on clustering to allow us to segment groups with like traits and rank their value to determine the value to the company. Back then (and even today),

the “value” of a customer was based purely on how much that customer was contributing to the company’s bottom line

When I entered the credit card industry, the possibilities to learn more about the customer got me more excited. All customers were given a value. The value of a customer was based on the following factors: frequency of credit card transactions, the number of products–credit card or otherwise; their ability to pay off outstanding balances, and even total debt to the bank.

As a customer, the more debt you carried, the more the bank loved you.

We knew everything about the customer: purchase history, credit score, complaint history etc. We used this information to sell them more stuff. The problem is we didn’t see the value as a “bank” customer. We only saw value from a “credit card” perspective.

So, not only did we score customers based on what they did for the bank’s revenues, we also created a very narrow view of who our customers were. This was hardly Customer Relationship Management (CRM) at its finest. That picture has radically changed today:

Value, today, is a two-way street. Customers now have more control and more information. Banks are required to listen and know more about their customers in order to drive stronger, more sustainable, and therefore more profitable relationships.

…. which leads me to the next point:

In banking, the product rules

It’s pretty ironic. In an environment where data is a primary element to communicate to customers, rarely do we look at the customer and their overall value to the bank. Products or as banks would say–Lines of Business (LOBs), are their own kingdoms.

While there is process and oversight in ensuring over-communication to any one customer is mitigated, there is little effort for LOBs to collaborate with each other otherwise.

Mortgages define their customers differently from Lending and from Credit Card Services. Now, as a bank customer the messages I receive from one bank is fragmented–many voices communicating separate messages through different mediums.

Minimal communication between departments typically has resulted in duplicated messages to the customer, and an apparent inefficiency. The right hand rarely knew what the left hand was doing.

This is the reason why, today, each division maps its own course for social media, resulting in varying tools and technology, and fragmented social accounts and programs.

Attempts to define the business by “customer” are futile

Banks don’t typically put the customer at the centre of the equation. That’s not how they’re structured.

My Senior VP of Credit Cards was a maverick. She made attempt to undo this siloed thinking within the LOB and create a litmus test for the rest of the bank. Where marketing was structured by card product first, an initiative was launched to revamp the department based on customer value.

Now, we would have a holistic view of the customer, all transactions, frequency, purchases, products, revenue potential, customer satisfaction. While this was being defined, a core team helped define the functional impacts and impending changes that were required. 

Along the way some critical insights began to surface:

  • the practices previously used by one product were not consistently adopted by another group

  • subsequently, successes realized in one group were not consistently shared with the other products

  • the central data team struggled to re-organize customer data to accommodate the new value system that was being implemented

  • the customer call centre needed more than just minor process tweaks to properly service customers based on the new configuration

  • while Credit Cards was making a move towards recognizing and re-evaluating the customer as a core focus, the rest of the LOBs continued with the status quo

It was clear that it would take much more “dismantling” of process and structure in order to deliver on a customer centric environment. The attempt of ONE department to do the right thing also meant that the entire bank structure needed to change … and that would mean strong upheaval in the process.

The reality was that the bank environment did not reward performance based on customer retention. It rewarded performance based on product revenue.

In order to accommodate a customer-driven strategy, it was clear that it demanded bank-wide cultural shift. Unless the mechanisms already in place: performance, structure and process were revised to support the new strategy, the initiative would fail.

Suffice it to say, Credit Cards had no choice but to revert to the original structure.

Today, the demands of the social customer requires banks to be ready to restructure its systems and processes. This is, by no means, an easy task.

A single customer could potentially have data residing within multiple systems and databases. The integration of all that information into one customer record will require disparate systems technology systems (in most cases, legacy databases) to interoperate in real time.

This is imperative in order to seamlessly integrate offerings across markets and LOBs.

Compliance: the elephant in the room

Compliance, to put it mildly, mandates much of the bank process and policy. It encompasses regulation, product disclosure, data integrity and security, and privacy.

Banking is bound by regulation.

Here are the facts:

In social media, customers will expect the bank to be more responsive and deal with their concerns, regardless of product. This will mean three things:

  1. Frontline staff will need to be armed with more information plus a single view of the customer in order to effectively manage requests and issues.

  2. Interactions will need to elicit more rapid response resolution, which will require frontline staff to be given more authority to make decisions.

  3. Governance needs to be established consistently across all channels and LOBs so there is firm-wide guidance and access.

Bank-only data will need some interoperability with social data to build a more holistic picture of the customer to support all touch points.  According to the Social Banker report:

Beyond integrating thousands of data points in real time, the shift to a CRM system will also demand rigorous controls, streamlined processes and effective governance frameworks to ensure that data is being properly managed and secured.

ING Direct in Canada recently integrated the Facebook API (application programming interface) into their technology environment (becoming…the first bank to deploy this functionality globally).

According to a friend who works in the technology side of a major Canadian bank, the holy grail is having the one “key” that validates the match between the customer bank record and the social accounts. This is a critical step in beginning to build the CRM framework to support all customer touch points.

Privacy concerns will become more apparent as banks begin to take advantage of mobile behaviour, conversation, influential relationships and increased psychographic information to better inform relevant offers and communication.  Regulation will evolve in tandem.

Social banks are an inevitability…. the question is when?

To make this happen means a cultural shift, an executive mandate, massive systems restructuring, decentralization of decision-making and empowerment at the edges.

Banks are now in the process of figuring this out. Locally, TD has already made the move to bring in firm-wide collaboration and communication solutions. Most banks are beginning to expand the definition of “social” beyond customer service and communications.

But until there is an urgency to make these changes (as RBC has recently experienced), I suspect that old habits may be forced to die hard.

3 thoughts on “Big Banks & Social: To Be or Not to Be?

  1. AmyMccTobin says:

    Whew! Lots of heavy thinking here, and its obvious that tremendous Change Management will have to take place before the the banking sector becomes truly social. Which one will be the first past the post?  Very interesting times for these sort of industries that are traditionally slow  moving and conservative, because the social world is certainly not waiting for them.  Neither are all of their customers who are becoming accustomed to much quicker response times.  The nimblest of them all will survive and prosper.

    • hessiej says:

      AmyMccTobin I remember when the bank wanted me to scope out all the impacts from “testing” online ads and SEM. I needed to work with Risk to revamp the credit scoring for online applications. I also had to work with Fraud to figure out a system to properly scale the review of applications coming in. Then I had to work with bank security to determine the “actual” effects of persistent cookies. That one made me laugh and I had to  business case this to validate that it would not blow up the back-end systems. Then I had to deliver a new marketing process to develop programs. If that’s what it took to implement ad units and PPC purchases, then imagine what banks will have to go through integrating social. Fun times!

  2. […] emerged from this type of thinking. Here is an earlier post I wrote about the banking industry: Big Banks and Social: To be or Not to Be. Banks are and have always been product centric –> both in objectives and compensation. […]

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