Web 2.0 And Why Banks Should Care

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Web 2.0 And Why Banks Should Care
Reputation economy

• Colin Henderson
• thebankwatch.com
• NetFinance 2007
• 19th April, 2007
• Scottsdale Arizona

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Internet is killing business models

• Retailing
• Research
• Newspapers
• Marketing
• Yet Banks have survived ....

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Motivation for online banking is largely cost
driven

• Generally .. Pure cost play
• Elimination of Branch activities

Online bill payments 39 Checks 34 Harris
Jan 2007
Source Pew Internet American Life Project,
Online Banking 2006
Source Aite Group, September 6, 2006
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Meantime new Internet models

• along comes, Zopa, Prosper, Wesabe,
  CircleLending, Kiva, FYGO ....
• Common theme - simple forum for participants to
  listen, interact, learn .....
• Middleman eliminated
• In the lending examples,typically borrower and
  lender get same rate

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Message 1

• Banks are vulnerable because of their built in
  cost structure, arising from technology and
  branches

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Online banking causes other sets of problems

• Financial services consumers have changed
• They're mistrustful, insecure, and hands-on.
• The result is that customer satisfaction has
  plummeted.
• What satisfies consumers are firms that are
  customer advocates
• Firms that demonstrate the four aspects of
  customer advocacy
• simplicity, benevolence, transparency, and
  trustworthiness
• .... enjoy higher customer satisfaction rates and
  greater cross-sell success

Forrester Research Firms That Demonstrate
Customer Advocacy Overcome Mistrust
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Online is an essential part of shopping experience
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Internet has highlighted the purchase process
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Amazon has made a science of user engagement.

• Amazon sells the same products as competitors
  such as Barnesandnoble.com, and they receive the
  same product descriptions, cover images, and
  editorial content from their vendors.
• ... orders of magnitude more user reviews,
  invitations to participate in varied ways on
  virtually every page
• .... even more importantly, they use user
  activity to produce better search results.
• Amazon always leads with "most popular", a
  real-time computation based not only on sales but
  other factors that Amazon insiders call the
  "flow" around products
• Barnesandnoble.com search is likely to lead with
  the company's own products, or sponsored results,
  

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What has changed here?
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People want to interact the web facilitates this

• Harnessing Collective Intelligence
• Hyperlinking is the foundation of the web
• eBay's product is the collective activity of all
  its users
• Amazon has made a science of user engagement
• .... greatest internet success stories don't
  advertise their products. Their adoption is
  driven by "viral marketing"--that is,
  recommendations propagating directly from one
  user to another
• The power of the permalink
• .. easy to gesture directly at a highly specific
  post on someone else's site and talk about it.
  Discussion emerged. Chat emerged.

If an essential part of Web 2.0 is harnessing
collective intelligence, turning the web into a
kind of global brain, the blogosphere is the
equivalent of constant mental chatter in the
forebrain, the voice we hear in all of our heads.
http//www.oreillynet.com/lpt/a/6228
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Within 5 years, net generation will outnumber the
rest of the working population
College internet ... or younger
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Commenting on interactive sites is growing
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Message 2 transaction based online banking is
not adequate to keep customers interested

• Generational change
• Different expectations about how internet should
  be interactive, and participative

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How can this be accomplished?

• Can social networks really replace Bank staff?
• Social plays a role in new models what's the
  role for Banks?
• Is there a better way to provide Banking that
  levers social activity to provide guidance,
  assistance, and advice

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McKinsey say Banks lag all firms in anticipated
use of Web 2.0
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Web 2.0 hints at very a different business model
Wesabe
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Small, incremental, steps are being taken ...
within the industry
Vancity
Wells Fargo
Ufirst
Verity Credit Union
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Big leaps are being made ... from outside
Wesabe
Zopa
Prosper
Boober
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Wesabe
Setting up a will
Use only cash
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Who are V
Blog link from their site
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Change Everything Vancity CU
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Student LoanDown Wells Fargo
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Ufirst, Plattsburg, NY State
Internet language
Flickr
Comments
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Thank you!
Questions, thoughts colin_at_thebkw.com
thebankwatch.com