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Shaping the future of finance

Social networks don’t need banks, they need friends

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Yesterday, I outlined the reasons why social media is of such importance to banks
and banks’ futures.  In keeping with the themes of this week, today
it’s the turn of social networks.

Social networks have been on the rise for a while and I define them as
places where people gather digitally to share a common interest. That’s
not the classical definition by the way, such as this one from

“A social network
is a social structure made of nodes (which are generally individuals or
organizations) that are tied by one or more specific types of
interdependency, such as values, visions, ideas, financial exchange,
friendship, kinship, dislike, conflict or trade.”


“A social network service
focuses on building online communities of people who share interests
and activities, or who are interested in exploring the interests and
activities of others.”

So we all now know what these are, and there are many examples from
Facebook to Club Penguin and from Bebo to MySpace. What you may not
know is that the number of people using these sites today number over
600 million individuals, according to Comscore. That’s 1 in 10 people on the planet, and 1 in 3 internet users.

The number of users is still rising at 25 percent per annum average,
with the Middle East and Africa being the fastest rising community, but
this is a worldwide phenomena. For example,
85% of Brazilian and Canadian internet users participate in social
networks online, compared with 78% of Brits and 70% of Americans.

That’s a lot of people.

Why are they all flocking to social networks?

Because it’s life augmentation.

These days folks talk about ‘life streams’ and that’s what it’s all
about – sharing your life with friends who are local and remote.
Sharing your life is all about your emotions, activities, sports and
hobbies, photos and videos, anything really.

And the people sharing their lives are not all youths, which is the
common assumption, as the average social network user is a woman of 39
with children, who is sharing her family’s life with friends and
extended family.

Equally, one of the fastest rising groups is older people, not young folks.

So that blows quite a few myths away for a start.

It’s not all about Facebook either.  Facebook is the largest of the
networks in the English speaking world, now beating MySpace into first
place, but don’t ignore local language sites such as Sonico in Latin
America or QQ in China.

It’s also not a new phenomena.  Friendster and Friends Reunited have
been around for a long time before these networks but, like blogging,
the new generation of social network is just much easier to use.

That is why Facebook grew from 50 million users to over 150 million between the summers of 2007 and 2008.

Anyways, my aim here is not to define this market. You can find that
sort of stuff anywhere. It’s to talk about the relevance of these
developments to banks.

What I find interesting in this context is that most banks ban the use
of social networks at work. The result was, until this became
mainstream, that I spent most of my time trying to explain what the
hell a social network was. I hope I don’t have to do that today, but
still find some bankers struggle with why this stuff works.

It is also worth pointing out that it is only since June 2008 that I’ve
found bankers generally who are familiar with what this is … that’s
about three years after this became noted by most industries and about
a year after most industries rolled out new business services to tap
into these markets.

Ah well, what the hell has a social network got to do with banking anyway?

Quite a lot actually.

A little like yesterday, social media educates, advises and supports,
which builds relationships and trust. So do social networks.

These days I might throw out the question to friends and family via
Facebook, “does anyone know which bank we can trust these days?”

Try it and see what happens ... mind you, if you're a banker reading this, you may not want to try that particular question.

With banks no longer trusted thanks to the credit crisis, and demise of
WaMu and Northern Rock and more, people are wondering who to trust.

Who ya gonna trust?


And who are bankbusters?

Your friends and family.

That is why social networks are critical to banks to gain future
business, as recommenders will come through your network and their
influence will be immense.

So how can a bank influence the influencers?



Investing in building their own social networks?

Not really … although there are a few who have, such as Fortis, Bank of America and HSBC.

These efforts are all tapping into the small business markets, where
managers and entrepreneurs with small and growing businesses need as
much support and advice as they can get.  That is what these banks have
established as platforms to support and advise them.

Fortis began this process with Join2Grow, a brilliant effort with zero overt advertising for the bank. Bank of America followed with their small business community
(note the top left: “powered by Bank of America”, as these are not
sales channels but relationshisp channels), and HSBC recently launched the HSBC Business Network.

The aim of these services is to create increased loyalty and revenue by
assisting the smaller business community with advice and support. That
makes sense and is a good entrée for any bank to get into this field.

Mind you, you don’t need to create your own platform to do this, as Visa recently launched their own Business Network in Facebook with almost 9,000 regular users today.

As we move into Facebook, banks are also doing some other interesting things, such as the Bank of America’s Medal Me application and H&R Block who are doing lots of stuff in Facebook from funky videos in a youth style to tax applications that are fun!

Apart from these experiments however, I have yet to see banks make much
out of social networks, but then I’ve yet to see anyone make much out
of social networks in a financial context (apart from the people who
created them).

These networks are not for finance you see. They are for advice and support.

This is why the only things financially related that you notice in Facebook are applications such as Pay Me, Spare Change  and PayPal.
This is because these are methods to pay between friends, and friends
are what you focus upon in social networks, not banking.

So I guess that’s my conclusion in general.

From a purely social networking viewpoint, banks need to focus upon
methods they can use to become friends with their participants in their
networks. Friends advise and support, they don’t sell, charge and make
money out of you. By advising and supporting, banks can build
relationships and trust and so, like social media, it will result in
advocacy from your 'fans' who then became loyal and easier to do
business with.

That is the point: building trust and loyalty.

Now we can talk about making money.

You don't make money through social networks.  You make money by
extending these business models into social banking and finance, which
I intend to cover tomorrow.

Therefore, although services such as Mint and Wesabe do fit with the
social network model, I’m separating this into social finance.

Chris Skinner Author Avatar

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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