Bank in the age of social networks; taking on the future with an app

Nowadays, a bank with its own app has become a must. Clients of credit institutions demand to be able to manage their accounts from the comfort of their own homes, using a smartphone, rather than having to queue at a branch.

It is no surprise then that the number of banks providing home banking services has grown steadily over recent years. However, this service is not only a result of the banks’ desire to improve customer relations (by facilitating the most common transactions), it is also a chance for the institutions to explore a market hitherto unknown to them: the online market.

Online banks and the threat of the web giants

The financial power of the giants of the web is undergoing rapid growth, which has led to these companies becoming interested in expanding into other sectors (banking in particular). This evolutionary process has now begun and the first ventures of these companies into the financial sector can already be observed in some markets, for example in the American and Chinese markets.

Many web businesses have expressed their desire to work towards creating a banking service for their clients, to be incorporated into the services already offered. This is making traditional credit institutions run for cover.

This threat is a real one and if such plans are implemented on a large scale, competing with these huge companies will become almost impossible. Even though the banks have latest generation apps which are able to offer a wide range of services, they will never be able to match the libraries of big data that the web giants possess.

Gathering client information is easy for these huge conglomerates, considering that they work on and develop strategies for big data analysis on a daily basis. This is why it will become equally easy for them to provide customised services (perhaps incorporated into the ones they already offer), with favourable discounts or even some free services.

Surveys show that the vast majority of people would be interested in trying banking services provided by the major web companies and would be willing to entrust their savings to them without any fear. The idea of having this type of service included in one’s favourite social network of trusted e-commerce site is a considerable incentive (in addition to the company’s online reputation, which is generally much better regarded than those of the traditional banks).

How can banks prepare for the future?

For the banks to try and compete on the same level as the web giants would be a high risk move. Market strategies are based on data analysis and there would be no way (not even for the most prestigious credit institutes in the world) to gain access to the big data possessed by those companies.

In addition to creating dedicated apps which are functional and have plenty of options, banks should also focus on the exclusivity of certain premium financial services. Creating personalised packages for the client, according to their needs and re-payment possibilities might be a good starting point.

Another tactic might be for banks to devote more importance to physical spaces in branches (setting up quiet areas where people could meet, in contrast with the stereotypical image of typically sterile bank/client interaction) would help clients to appreciate their relationships with credit institutions in a more relaxed setting.

The progress of the web giants is almost unstoppable; in practice it is no longer a question of ‘if’ but ‘when’ they will enter the financial markets.  Although the difference in terms of resources is insurmountable, traditional banks will still have the opportunity to do battle on an even playing field, if they are able to enhance the range of services they offer, while rendering them interesting and unique.

Translated by Joanne Beckwith