News that Facebook would like to take on banking has made waves in recent days, especially in Fintech circles. Let’s get one thing straight, Facebook isn’t going to become a bank, but it does have plans to work with banks to help them create more socially-connected transactions such as payments among friends. How exactly is this going to be possible? And do customers really want to put any of their banking needs in the hands of a social networking company?
According to BankInnovation, Citibank recently asked its Facebook and Twitter subscribers if they would do banking on Facebook and the majority said security would make them hesitant to do so. In reality, the Facebook capabilities would be treated as just another application that needed to be developed on the banking side and with the bank’s normal security. Facebook is obviously aware that the banking public wants the same security it would have on the standard online banking site (or in some cases, higher security, depending on the bank).
In fact, a recent Fortune article mentioned that Facebook is in trials now with a few financials. One of them, Australia’s Commonwealth Bank, is currently planning to launch the application sometime this year. It will allow Facebook users who are bank customers to make payments to third parties as well as Facebook friends, according to the Fortune article, and Commonwealth will secure transactions with its own authentication system – similar to how payments are secured on its online and mobile banking site.
While Facebook’s initiative is interesting, the question of ‘why’ still remains. As Backbase’s CEO Jouk Pleiter says, “The larger banks are implementing these kinds of applications already, but along with the ability to integrate with all kinds of other online banking capabilities. This looks more like something geared towards smaller banks that don’t have the resources larger banks do in this area.”
The idea that creating a social presence needs to involve Facebook is powerful. However, implementing payments isn’t the only way to make an impact and being social doesn’t always have to involve Facebook or Twitter. Some banks are finding success by doing such things as adding funny, interactive video to help explain products better or by implementing activities more suited to entertainment than education such as photo booths at the branch (users can then post those photos to their Facebook profiles — excellent for PR) or even, as a bank in Michigan is doing, starting flash mobs.