Fast Facts: Student Loans

January 22, 2013
/   Insights

The Financial Services Roundtable recently released another iteration of its Fast Facts, reliable, bullet-point research about issues facing the financial services industry. Topics span TARP, Dodd-Frank, insurance, lending, retirement savings and more.  Below are some updated Fast...

Cause and Effect: If you build it, will they come?

July 23, 2014
/   Spotlight

Many financial institutions assume that digital banking is lucrative because the most valuable customers happen to bank online. While there is certainly a correlation between online bankers and higher profitability, quantitative evidence suggests that...

Intuit 2020 Report: The Future of Financial Services

April 11, 2011
/   Insights

Today, Intuit released the latest edition of the Intuit 2020 report, Intuit 2020 Report: The Future of Financial Services, which identifies and examines four key trend areas that will  transform the financial services industry...

The Top 10 Trends in the Digital Banking Industry

December 18, 2013
/   Spotlight

2014 is rapidly approaching and as the year wraps, the Digital Insight team has pulled together the top 10 trends in the digital banking industry based on data and trends from studying financial institutions....

Small Business: Perception vs. Reality

November 21, 2012
/   Insights

In the most recent election cycle, like most others before it, the one sector of the economy that got the most attention was small business.  This is the future, we were told by every...

Financial Literacy Month: How are you celebrating?

March 22, 2013
/   Insights

With April approaching, it’s almost time to kick off Financial Literacy Month! Strongly supported by the United States Congress and the Financial Literacy and Education Commission, Financial Literacy Month aims to promote the importance...

Industry Perception, Optical Delusion

January 14, 2013
/   Insights

In Washington, they talk a lot about ‘optics.’ This has nothing to do with regulatory scrutiny, or government mandates on eyeglasses. It has to do with perception—how something looks, the way a particular story...

Social Banking: Blessing or Curse?

August 1, 2012
/   Insights

While the topic of Facebook and banking has generated plenty of heat (though not necessarily a lot of light), the debate seems mostly focused on two broad issues: The much-maligned IPO, and the notion...

While the topic of Facebook and banking has generated plenty of heat (though not necessarily a lot of light), the debate seems mostly focused on two broad issues: The much-maligned IPO, and the notion that the company might take business away from the banking sector, such as through Facebook Credits or a self-branded credit card.

The IPO, of course, continues to stir debate—just this week, it was reported that UBS AG, Switzerland’s largest bank (by assets) took a hit of more than $350 million, nearly half its entire second-quarter profit, on the ill-fated deal. (UBS now plans to join several other brokerage institutions readying legal action against NASDAQ). As for Facebook serving becoming a financial institution itself, the mobile payment system for third-party developers got a facelift recently, and there’s now a better subscription billing system.  However, speculation still seems further along than reality.

But there’s another strain emerging that might have even greater ramifications. This is where global financial services conglomerates enable individuals, and perhaps businesses, to do their banking via Facebook.

It’s not as if banks aren’t aware of Facebook—they all have a presence on the social network platform, and quite a few have built branded communities on it. However, that’s still more marketing than finance. What’s happening now goes quite a bit further.

Much of the early action seems to be coming from overseas. First National Bank of South Africa, ASB Bank of New Zealand and Commonwealth Bank of Australia are all launching apparently major initiatives to capitalize on ‘social banking.’ Essentially, the plan is to enable peer-to-peer (P2P) payments over the network between ‘friends.’ Of course, it almost certainly won’t stop there: It’s easy to envision a future in which virtually all consumer transactions, including bill payments, are done over Facebook, since just about everyone and everything is a member anyway.

For the record, skeptics are already out in force, warning consumers that blurring the line between a bank and a social network could bring serious problems. But it may be too late to put the genie back in the bottle. While somewhat smaller financial institutions can be perceived as risk-takers, Citigroup is something else entirely. That financial powerhouse is now asking customers whether they would do their banking via Facebook. It’s also been noted that JP Morgan Chase actually has more ‘likes’ on Facebook than Citi, and is surely looking for ways to monetize that advantage. Besides, as more financial transaction are conducted via mobile applications, the prospect of drastically altering banking practices doesn’t seem nearly so outlandish.

Looking ahead, it’s important to understand that any wholesale change in banking will not take place in a vacuum—Facebook will change, along with user habits, security measures, regulations, etc., before that happens. While it already counts a sixth of the world’s population as members, Facebook is still simplistic in terms of its interface and primitive in its technology underpinnings. Look at the typical user interface—there’s virtually no distinction permissible between different categories of ‘friends,’ or non-transparent and secure ways to do much business. That’s almost surely going to change.

Most consumers now do almost all their communicating via Facebook, just as social networking and social media are no longer separate entities but woven into every aspect of our lives. At some point, everything will become, in some sense, ‘social.’ The idea that banking can somehow stay immune is naïve. Instead of resisting it, let’s just do our part to make it easy, secure and profitable.

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James W. Gabberty

Gabberty is a professor of information systems at Pace University in New York City. An alumnus of the Massachusetts Institute of Technology and New York University Polytechnic Institute, he has served as an expert witness in telecommunication and information security at the federal and state levels and holds numerous certifications from SANS & ISACA.

Marisa Mann

Marisa Mann brings over 15 years of experience in consulting and financial services industries to the Solstice team, working on large scale enterprise initiatives across many technologies, including specializing in the digital space – Internet and mobile. Mann is passionate about mobile and the endless possibilities for the enterprise, delivering business value through strong brand recognition and driving to excellence in the consumer experience. Prior to Solstice, Mann worked at JP Morgan Chase, Diamond Management and Technology Consultants, Washington Mutual, Inc, and Accenture.

Zachary Ehrlich

25-year-old writer, and as a native San Franciscan, I am unreasonably loyal to Bank of America, if only for their superhero-like origin story, involving the 1906 earthquake and Italian fruit vendors.

Brad Strothkamp

http://www.forrester.com/rb/analyst/brad_strothkamp