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PCBB Banc Investment Daily December 29, 2015
Banc Investment Daily
December 29, 2015

Friendly Activity Online

Show us your Facebook account and we will know who you are. As the need for security and authentication grows, this is increasingly common among online players. Airbnb, the popular website where travelers find lodging with local folks, has even created an ID verification process for customers and hosts that involves Facebook accounts. The aim: get reassurance that you are really who you say you are. Airbnb is not alone in this. Tinder Seduction, the hot dating app, asks as well for a link to your Facebook account and Amazon likes to go through your Facebook interests. Knowing your profile, Amazon will be able to make appropriate recommendations and sell more products.
This treasure trove of personal but very public information is naturally tempting not only for online retailers to capture but also for bankers. Imagine the quality of knowledge you might be able to collect via social media. The footprints that customers leave across the digital world say a lot about their preferences, habits, behavior, and their friends. All of these can give you a more targeted marketing opportunity at the very least as you seek to capture new customers and keep the ones you already have.
Better yet for tracking are those cookies that record the activities of the net surfer after they leave the bank's website. This helps you better understand the customer's state of mind. These cookies could alert the bank about important lifestyle events, such as a marriage or divorce, the arrival of a new child, a teenager going to college or a change in career. Having such insider information is gold to marketing people who can leverage it to send a timely message from the bank offering customized services. The options here are nearly limitless.
Social media offers new possibilities in listening in on customer conversations and behaviors, but at the same time, it can be problematic. The consumer may not appreciate the invasion of their private life. The banking industry is built around respecting and protecting the privacy of customers, so leveraging social media opportunities is a double-edged sword. After all, in many cases the customer may not realize that using the Internet leaves a trail of information behind that is virtually unprotected. In theory, the bank may use it, but does the client really want his trusted bank to be so inquisitive?
Researchers at the University of PA tried to answer this question and others by focusing on Americans' attitude toward privacy. The researchers found that 91% of the respondents believe it is not fair to collect information about them--if they don't know. Further, the promise of a discount will not change their mind as 84% want to have control of what marketers can learn.
So what should bankers do about this? Forget about it? Not necessarily. Banks may want to consider just asking for permission to visit profiles on Facebook or LinkedIn. The process could be part of the customer application for a loan or for something else perhaps. When the bank gets the green light, it opens a window into potentially useful information but here too you have to be careful to avoid running afoul of the laws.
Online lenders say their algorithms give a better measure of ability to repay than more common methods used by banks. We will obviously have to wait until the next crisis to know who is right. However, suffice it to say that digital information can be valuable and perhaps more timely than traditional methods in some cases.
Digital data analysis continues to expand, so our advice is to just follow the rules and embrace it. You might capture some new customers more easily as you engage with existing ones and strengthen relationships.