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I posted this yesterday and got a lot of response. Interestingly, most of it non-public in emails and DMs but why that is, warrants another analysis.
My tweet refers to this article I wrote many moons ago warning that brands will become banks if banks won’t become brands themselves in light of this Techcrunch article highlighting Facebook’s newly awarded European Payment License and the comment belongs to Christoffer who works for a bank I know intimately – Skandiabanken, which is the original challenger bank of the Nordics. By the way, when these guys say “digital ecosystem” and “disintermediate” they are not using empty jargon like others may, they have been through the rings trying to understand engagement – consider they started as part of the group who did all the other components of long term investment and none of the day-to-day banking before they created them.-
FACEBOOK *IS* A BANK
First of all let’s get this out of the way – there is no “will be” or “intends to be” about this. They have acquired an eMoney license, PSD2 is happening and they are already doing in-app transfers in the US. Between these factors there are no “if”s and “but”s to be considered – that is a bank. Many FinTech-years ago we could afford to play naive and doubt it, but I trust these days anyone reading this knows that a banking license is superfluous if you combine those elements.
Secondly, over the past few years, they made no secret about this being their next step. Take this article about the then newly acquired PayPal superstar David Marcus.
“It’s the job of Marcus, a gently spoken 42-year-old French-born fintech guy, to turn a proprietary messaging app into this all-encompassing platform – essentially, an operating system on which third-party apps, and entire businesses, can be built in ways that lock them into the Facebook ecosystem. The Chinese have already shown what’s possible: social media giant Tencent enables 600 million people each month to book taxis, check in for flights, play games, buy cinema tickets, manage banking, reserve doctors’ appointments, donate to charity and video-conference all without leaving Weixin, the Chinese version of its WeChat app.”
With that said, just because Facebook is a bank it doesn’t automatically follow that it will succeed. As any other new entrant in any market what they need is:
THE AUDIENCE
There is little to dissect about this. They have the audience. Facebook’s numbers in terms of adoption and usage are unquotable, theirs is now a model of customer acquisition used in business schools as an example of successful platform building and relationship creation.
It is also only from hereon that they are starting to get serious about monetising on their huge numbers. Let’s face it, no one buys nearly 2Bn users if they don’t intend to make money off them, although of course, becoming a bank is not the way to do so.
THE PRODUCT
Facebook’s is not the most beautiful digital product we use today. Or the easiest to navigate. Or the most surprisingly delightful. It doesn’t win in any of those categories but it is certainly in the top echelon of all of them.
Not only that, but Facebook constantly and -some would claim unlike Google- constantly upping its own game product development wise, and features that we all would have bet would be a flop end up polished and widely adopted. Just look at the ease of integration of Facebook Messenger into Slack. Do you know why that is? Because teams use it for work communication over serious/secure/etc competition such as Skype for Business. And if their features don’t win the consumer over they are certainly not afraid to go out and buy them ready-made from elsewhere as they have done with Whatsapp although they claim they need them both.
Just because they haven’t yet made a big fuss about adding a “show me my balance and a few ideas of how to do better next month please, M” feature or you can’t see the “MyMoney” tab in your Facebook app’s menu it doesn’t mean it isn’t being cooked. If one looks at UK’s many heralded challengers, most are missing an evident offering as well so far and only time will tell who has come a longer way in designing the end product behind closed doors.
In fact, if we are to judge by the obscenely easy-to-use money transfer feature US clients are already enjoying, it is one worth waiting for.
THE TRUST
In 2010 this was the tune to which we hated FB – today all or at least most of those have been either sorted, or the perception changed, so the trust capital Facebook is building is on the increase. Not to mention they have the money and patience to wait out an entire generation of disbelievers if need be.
There is an interesting dissonance between how much people believe they trust Facebook when polled (not at all) and how much information they freely deposit into it through daily usage (GB of intensely sensitive data). The theories as to why this occurs all come back to how a cerebral privacy concern will not stand in the way of instant social gratification. In a way, it is a subconscious identity value exchange. We are aware our personal information is valuable and potentially misplaced but the risk is worth it as the emotional reward is great enough.
Privacy concerns are nonetheless, the main reason quoted as to why the Facebook Bank may not succeed. Who in the industry has not heard the following reaction of incumbents when discussing this topic? “Oh c’mon, who wants to bank with Facebook?!? I never even post photos of my kids!”
Generalisations aside, people do trust Facebook. Maybe not “your people” or “my people” -whatever segment you identify with-, but enough people of the total to make up one of the word’s largest bank. Overnight.
We choose to read the above as “94% of users do NOT trust Facebook”! but look at the first segment. 3%.
What’s 3% of 2Bn? Two Lloyds banks is what.
THE BRAND
On the plus side, bank already have by comparison an immense trust capital even if according to EY’s latest findings it is diminishing .
Also on the plus side, banks could buy 2 Bn users. Not with ease and not likely, but conceivably, a few of them could poll their resources and do so. Similarly, enough common conviction to spur that could also, hypothetically, power them to build a product that people truly wanted and enjoyed using. Hypothetically.
What can’t be easily matched and what all banks -new or old- should fear is this: Banks are not brands . Facebook is a real brand – deeply life embedded and intensely emotionally relevant.
23% of world’s total population has it today as the hub of their social lives. 1 in every 5 humans use it as a primary communication method, a photo repository, a news outlet, a virtual shopping mall. An intrinsic part of our everyday lives that highly matters to us and is inserting itself deeper and deeper into our subconscious. Take the effect of the sentimental value that Facebook Memories announced in 2015 is exerting over its users – it is nothing short of monumental and it will prove itself a cornerstone in Facebook’s unbelievably scintillating engagement strategy.
What could banks bring to the table to match that when they will not even take a close look at the customer’s data?
“BUT WHY?!?”
A common reassuring mantra about the Bank of Facebook one can hear in the industry is the old – “Why would they even want to be a retail bank? There’s no money on it!“adagio, as if the social media giant has ever been instant ROI driven.
Facebook knows being a retail bank doesn’t pay off in itself, but they also know how intensely personal one’s relationship with their finances is and how powerful of an engagement play this is, and while they may not want to be our cashier they certainly want to be our life management console.
Will my child be using this life console when he grows up and implicitly be banking with Facebook? No doubt in my mind. The only question is “Will he be banking with HSBC as well?” Maybe. Whether it will be “with” HSBC or “on top of” HSBC – a relationship partner or the invisible mechanism powering Facebook Bank’s experience is what is at stake.
This is it, the year that a real brand becomes a bank. There’s no more time to waste to stay in the game.