What’s not to like?
The rise of Facebook has been one of the most striking cultural phenomena of the past decade. In January 2007 the site had around 25 million users. But by July 2014, Facebook had reached 2.2 billion users; a number equivalent to one out of every three people on this planet. Meanwhile, Twitter had emerged as the platform of business and news, with 500 million posts ‘tweeted’ daily by its 271 million active users.
Since Facebook was founded in 2004, social media has been somewhat erroneously implicated in revolutions such as the ‘Arab Spring’, has destroyed reputations and has moved stock markets. Given the staggering scale of change brought about by social media, it is possible to feel some sympathy for global banks. When I joined Facebook in 2007, financial services were still largely delivered over a counter in a bank branch. I had never heard of the phrase ‘social media’, statements arrived via letter, I communicated with the bank via telephone and nearly all daily transactions were made in cash. Today, all of the above sounds like reminiscences of an old man.
Illustrations of the change are everywhere. In September 2013, Icici Bank in India launched a Facebook app that lets customers pay their friends and share expenses between groups of people on Facebook. The Pockets by Icici Bank app evolved from the bank’s Your Bank Facebook app, which was introduced the previous year. Your Bank allowed customers to view their savings account details and statements while on Facebook, as well as order cheque books and upgrade their debit card. New features in Pockets include ‘Split ‘n’ share’, in which a customer splits and tracks group expenses and shares them with friends; a ‘Pay a friend’ feature that works without having to know the recipient’s bank account details; and a recharge prepaid mobile feature. There is also a facility to enable users to book movie tickets and organise a cinema visit with a group of Facebook friends.
Icici Bank is not an obscure financial institution; it is the largest private sector bank in the world’s second most populous country. Facebook has more than 100 million users in India, of which 40 per cent are under the age of 30 and the bank is looking to them for its future. “Pockets by Icici Bank will enable the young consumers, who spend a lot of time on Facebook, to carry out a wide set of transactions without having to leave the social media site,” says Chanda Kochhar, chief executive at Icici Bank.
For security, the app uses 128 bit encryption to protect customer information. For each transaction, a unique, one-time password is sent to the customer’s mobile number to verify the transaction. Customers can access the Icici Bank app by logging into Facebook, then going to the Icici Bank official Facebook page and clicking on the tab for Pockets by Icici Bank. The customer then registers, enters his or her debit card number and PIN, and selects a new four digit PIN that can be used for all subsequent logins.
“For Generation Z, the first port of call if they are unhappy with a financial service provider is to tweet,” says Anne MacRae, head of financial services at Fujitsu. “Twitter is the medium of choice for expressing satisfaction or dissatisfaction. If banks want to keep the customer intimacy that used to exist in the branch, they need to engage via this channel.”
Examples of customer engagement in social media are fast becoming ubiquitous. Spain’s La Caixa bank has its own Facebook portal, in which users can check their balances. In the UK, Nationwide Building Society is particularly notable for its approach, which focuses on engaging playfully with customers via Twitter, holding photographic competitions and posting interesting facts as well as responding to customer service questions. Major retail banks including HSBC, Royal Bank of Scotland, Lloyds and others also offer customer service via Twitter. But some observers believe there are opportunities that go far beyond this, including improving internal bank productivity.
Germany’s Fidor Bank, which was formed during the financial crisis, is focused on customer integration, interaction and transparency and was built as a social platform. Chief executive Matthias Kröner says the bank has won back the trust the industry had lost during the crisis. Speaking at the International Payments Summit in London earlier this year, Kröner said: “Banking is a service industry and you must integrate any services innovation to include the customer.” He cited a US survey of young people, 73 per cent of whom said they would be more interested in banking services from companies such as Apple, Google, PayPal and Amazon than from the main four US banks.
Fidor Bank is run as an online community and has an application store and users can rank various products. The bank also works with Bitcoin, Ripple and other virtual currency exchanges. The bank also has an open API which can be accessed by developers.
In October, UBS introduced a ‘social intranet’ system designed to help the bank’s employees find the information they need faster. Built by Californian technology firm Jive Software, the system produced impressive results, says Peter Barnes, global head of Web communication and collaboration IT at UBS: a 20-25 per cent decrease in staff operational costs, together with a 20-30 per cent increase in access to expertise and a 35 per cent increase in collaboration.
The idea that social media technology can help a bank to improve its efficiency might have been considered a long shot a few years ago. But according to Barnes, it can be genuinely useful. “If you have a question, people who may be in another silo within the same organisation, or even in another country, might be able to answer it. Anything that enables that to happen is a good thing, especially when you’re in a huge organisation,” he says.
Tony Zingale, chief executive at Jive, adds that there are sound business reasons supporting a move to embrace social media including an estimated $1.3 trillion wasted every year because of the length of time senior employees spend doing often unproductive tasks, such as responding to emails and looking for information.
“Internet and email don’t serve the needs of employees in productivity,” says Zingale. “The technology behind email is 35 years old. It was never designed as a networking tool. In professional life the volume of emails is overwhelming and that’s a drain on productivity. The answer is to create social intranets, people portals where people can communicate, employees can be trained, customers can create communities and like-minded individuals can form groups and turn their ideas into action.”
Some of the most innovative developments in social media have taken place in the capital markets, where banks and financial technology companies have been concentrating on ways to turn the unstructured data flows provided by Twitter and other sites into a competitive advantage over their trading rivals.
One of the earliest appeared in November 2012, when French company IoSquare launched a social media sentiment index that can be used to track positive or negative tweets on a given stock or topic. It was released on the Bloomberg App Portal. In January 2013, online trading service DCM Capital released a trading platform with a social media sentiment feed, allowing traders to incorporate information from channels such as Twitter and Facebook into their trading decisions.
It was not long before some of the major financial services players caught up. The following month, February 2013, Thomson Reuters added social media feeds to its Eikon market analysis software and its trading application Elektron. The sources for the social media added to Eikon are Twitter and StockTwits, a similar site dedicated specifically to traders and investors. Albert Lojko, head of content strategy, data management and delivery at Thomson Reuters, says the challenge was to find the relevant tweets for a particular user, which required building a system of ranking by which tweets could be assessed and rated based on their importance. The firm built an algorithm designed to interpret and filter the mass of social media. Individual users and institutions are rated on a scale of one to 100, with one being low influence and 100 being very influential.
In a demonstration seen by Banking Technology, a Twitter user called Wall Street Jesus was identified as high-influence, based on the users’ 22,000 followers and frequent tweets on stock market movements. All tweets are also assessed on whether they share positive or negative sentiment and this information is fed into the data and analytics the Eikon user receives.
In April 2013, Bloomberg added real-time Twitter feeds to its Bloomberg Professional service so that market participants could use Twitter updates from corporations, executives, governments, media outlets and other sources to help make investment decisions. Then in October, UK-based financial technology firm Eagle Alpha launched a new tool called Social Sonar, which it claimed could help banks and their clients gain a decisive trading advantage over their rivals, based on Twitter posts.
“The use of social media in financial services is very focused on Twitter,” says Ted Merz, news content manager at Bloomberg. “The US Securities and Exchange Commission has said that posts on Twitter are valid as a form of disclosure and releasing information, so that has helped to fuel its growth. Companies are using it to reach investors and there is now a large amount of data coming at you.”
According to Merz, some of the useful attributes that can be gleaned from Twitter posts include unusual trading volumes, corporate actions, as well as trends such as a company being tweeted more than it used to be, positive and negative sentiment about a company or country. Bloomberg has algos that classify positive and negative tweets and a network of news reporters working out who the best tweeters are in each country. Bloomberg also considers how often a user tweets and how many followers he or she has. There are also specialist sources, such as China’s Sina Weibo, which has been described as a combination of Facebook and Twitter. Used by more than 30 per cent of China’s internet users, Sina Weibo is also valuable as a source for international investors that are desperate to get information on events in China, he says.
“This is just the beginning,” adds Merz. “There is a lot more change to come and the more we categorise, the better we can help ensure that the most relevant information reaches the people who need it. The volume is a challenge and we structure that for the investor. It’s about helping people to find information.”
In the case of Eagle Alpha, the company searched through Twitter’s 500 million users to find the most relevant sources of content for financial services. These include UK chief executives, US congressmen and institutions such as the Federal Reserve Bank of New York. The objective is to bring information to traders that can be traded and turned into an advantage versus competitors.
“It’s important to be faster than the market,” says Mike Reuter, senior broker at interdealer brokerage firm Tradition. “If you’re trading a few minutes ahead, that’s worth a few €100,000 a time. Social Sonar is giving me at least one or two pieces of information every day that can’t be found somewhere else. Over a week, over a month that’s a lot of extra information and the benefit of getting there first easily justifies the cost.”
For some financial institutions, the concepts of social media can go further still. In January 2014, Denmark’s Saxo Bank launched an online social trading community called TradingFloor.com, which draws on social media concepts such as LinkedIn and blogging alongside Bloomberg/Reuters style market data and news in an attempt to make trading more ‘social’. On the new site, beta.tradingfloor.com, traders can share their performance data, follow their peers and copy successful trading strategies. The site posts market news and views, data, insights and trade ideas from Saxo Bank’s research teams, while a real-time stream plots market sentiment. There’s also a TV channel with reporting from former ITV News and BBC World staff Angus Walker and Owen Thomas.
Users can share, ‘like’ and comment on others’ trades. It’s designed to be simple, so traders can read a trade idea and place an order using one click. There’s also a reporting system tied into analysis, so that traders can check their own performance over varying time periods and criteria. In time, the bank plans to expand the site with recommended trade ideas and blog posts based on behaviour analysis. The bank argues that by enabling investors to share their trades openly, interact with each other, post comments and strategies, discuss ideas, follow and copy each other, it will make a better market.
“We want to set free the peer to peer power of traders around the globe by enabling them to connect online with experienced and like-minded investors who are tired of input from salespeople from traditional banks,” say the bank’s co-founders Kim Fournais and Lars Seier Christensen. “We want to democratise access to trading and fund management by opening up the otherwise closed world of trading. We believe that this may radically change how investors will go about trading FX, contracts for difference, options, futures, bonds and equities in the future, making trading a social experience.”
