The Cognitive Economy is Driving Innovation & Disruption in Banking

By: Sandy Carter
October 2015

SANDY CARTER

GENERAL MANAGER CLOUD ECOSYSTEM
AND DEVELOPERS IBM

A recognized leader in social business, best-selling author, and one of the most influential people in Web 2.0 technology, Sandy Carter is IBM General Manager Cloud Ecosystem and Developers. She is responsible for IBM’s worldwide focus on expanding the Cloud ecosystem for ISVs, Entrepreneurs, Developers, and Academics, which influences one third of the revenue for IBM. Sandy has received numerous awards and recognition such as: Top 10 Cloud Influencer, Forbes Global Top 40 Social Marketing Masters, Top 10 in Social Media, Top 50 Social Business Influencers, 10 Most Powerful Women in Tech, and CNN Women of the Channel. Sandy is on the board of WITI (Women in Technology International), Girls in Tech, and International Child Art Foundation. 

Social media has become a part of every business’s DNA. With 2 billion people connected to the Internet, Social Business is quickly becoming the primary means for communication and collaboration. Young people may have spearheaded the changes, but people of all ages have joined the virtual revolution: 89 percent of the millennial generation use social networking sites, but so do 72 percent of baby boomers. And the gap is closing.

Social has impacted banking, just as in other industries. But banking brings a unique set of challenges to the table, such as regulations and bleeding edge technology leadership. Social media is impacting banking in three major areas.

Community decision-making:

Mobile and social are bringing data and decision-making to the fingertips of people at the front lines of your organization through those who need to act, enabling your organization to become more nimble and provide better service. Communities provide insight into what is truly valued by your best clients and those considering your service.

Communities are very powerful. They are a group of people interacting in an online space about shared interests, topics, or material. Communities provide an excellent way to connect members of a team and help them to stay in touch and share information. Communities can be public or restricted, allowing community owners to control who can join the community and access community content.

A community is engaged in active discussions and sharing. They comment, debate, and share expertise. They are consistent and responsive. For example, a community that my team runs is called developerWorks. The developerWorks community is actively engaged, with over 4 million members. They engage through member-driven topics on technology. The engagement is driven
by trust in open and transparent discussions (what works and what doesn’t) and by perceived value. IBM has experts that are passionate about providing the best support in the industry. With the right people in the community, the value-based engagement shines through as the members become community champions – internally and externally.

Banks that leverage communities not only see soft value in areas that bring content, ideas, and importantly Loyalty, but also revenue and cost reduction.

Examples of communities in finance and insurance industries would include FindBrok, a startup that was formed in 2012 to create the first

worldwide social network targeted specifically for the finance and insurance industries. The company strives to help professionals in these fields build business relationships, improve online visibility, offer advice and recommendations, and share business referrals.

What if you could change the world by creating a new credit card and a mobile app? That was the thought of another startup, Charity Charge, which is Launching a credit card that will not only benefit a charity of choice but a complimentary mobile app allows you to connect with and watch the direct impact of your contributions.

Another startup created a platform where people can publicly save – contributing real money to an account which is visible to others. So grandparents can cheer on (and add to) the grandkids piggy bank. And young people can save for that first house, cheered on and hopefully helped by family and friends. The big vacation can get the “shake the piggy bank and see if it is full” treatment – “when we reach $3000, it’s off to Hawaii”.

Gift cards hit it big in numerous countries the last few holiday seasons, and transaction sites for Starbucks and others allow one to load cards for personal use as well as provide “a free cup of coffee on me”

for friends. Others like ice cream and movie shops have jumped in, making the transaction a social thing.

Insight driven processes:

Insight from non-traditional data – social like Twitter, Internet of Things, wearable devices, m2m – is being used in real-time business critical processes to create new business moments. More data, insight and capabilities are available in both employee and customer devices at the point of action, enabling faster, better decisions, and action in the business moment.

Many industries are ahead of banking on this course – and areas like liability, copyright, and regulation are real considerations. Facebook, for instance, claims rights to all things posted on their pages. But new business moments can be created by capturing the social data.

The Bank of China created a new Smart Branch bringing together innovative technologies and approaches to leave each customer with the best possible experience, including creation of a customer experience section that allows customers to freely experience

the bank’s services and products. They capture anonymous user behavior from all interactive media in the branch, and analyze it for insight. The more they understand customer behavior, the easier it will be for the bank to make changes that respond to customer preferences. They have also transformed clients into advocates, by creating a seamless digital experience where customers can both purchase services as well as get information through interactive QR codes, and then share the QR codes with friends on social networks to make digital recommendations.

Ecosystem-based innovation:

Companies are effectively becoming digital innovators. They are focusing on creating their unique differentiation and sourcing from communities to help complete complex products and solutions. They are leveraging digital services from a broad ecosystem so they can focus on their core competences.

In today’s Social Media world, co-creation enables banks to deliver differentiated value. By engaging clients and the ecosystem, problem solving and resource sharing become an innovative think tank, leveraging this new ecosystem to drive solutions to market faster and to turn the complexity into something simple and scalable.

For example, Citibank kicked off the Citi® Mobile Challenge, a quest to find developers and designers to create new and innovative FinTech solutions with Citi’s digital platforms. After successful events in the US, Europe, Middle East and Africa, the Citi® Mobile Challenge is now starting in Asia Pacific. Citibank leveraged this Mobile Challenge to socially create innovations which give consumers personalized, intuitive products and services that transform how they think about banking.

In all of these top 3 areas, the most important part of social business may be the data view – that social data becomes increasingly important as a way to gain a 360 degree view of customer, employee, and partner. A way to monitor web traffic on regular websites and social sites, look for opportunities and issues that arise (and can become quickly viral), and a way to build a collaboration of communities needed to solve the issue and communicate facts socially and responsibly as needed are crucial in the quest for social eminence.

It is a real banking issue. For example, a Commonwealth bank had a software glitch that allowed ATMs to deliver cash well beyond limits of account balances. The news went to Twitter and was viral in minutes, and people began to line up at the ATMs just in hours. The bottom line here is to look at data from social systems as enterprise data, and to build analytics strategies to match them.

We are at a tipping point in the convergence of banking and social. The business will increasingly require a tight coupling of the two to maximize their success. Customers will want to combine data from social media and other sources – that’s data from or about people – and use analytics to bring the information together, aggregate, filter, correlate it, and analyze it together to generate new insight. And they will want banks to get smart in the way they use the information from social to involve them, get their participation and improve their overall customer experience.

Digital disruption through social can be a blessing or a curse. A smart bank or financial institution will Look at the best practices of contemporaries or other businesses and leverage them for their own business.