Social media and fintech – what kind of relationship?
If social media was the most important marketing and communication trend of this decade, then fintech promises to deliver the most radical changes in the conduct of financial services in the next one.
But how will these two powerful technological change agents actually interact? And how significant will an understanding of that interaction be to successful banking in the coming decade?
The most important idea to get across is that the line between the two is set to blur. Until now, fintech has been seen essentially as an ever-faster improved “how-to”, and social media as a low-cost marketing channel, largely directed at millennials through mobile devices, that needs regulation and carries significant reputational risk.
For almost a decade now, existing and new banks as disparate as DenizBank in Turkey and Amex worldwide, have been integrating Facebook and bank accounts, using Facebook to run their entire online financial lives, and optimising their marketing efforts at customers based on datamining drawn from Facebook. The backlash from Cambridge Analytica may restrict the trade of social media data by financial sector technology companies; existing banks, with the most to gain from restricting data sharing and sales, have been quick to call from increased regulation, whilst the General Data Protection Regulation (GDPR) itself is supposed to curb the datamining industry, but the flood of datamining is not likely to be dammed so easily.
Most importantly, however, focusing on data only may miss the point. Artificial intelligence (AI) can turn a social media channel into a self-improving business system, changing not only the product, marketing and compliance but also the entire business strategy.
A start-up is the most obvious example, so let’s consider a hypothetical example. Online retail peer-to-peer (P2P) lenders like US fallen star Lending Club, Mintos, Twino, and Bondora in Europe, and in the UK, Funding Circle, have been using social media for over a decade, with varying degrees of success and returns to investors. Key problems for P2P lenders have included accessing clients, obvious enough, but also, more subtly, identifying the key sources of finance for potential lenders and targeting them appropriately.
Start-up Car-to-Car (C2C) aims to open up the huge unutilised area of unused equity lying in owner’s vehicles, initially at a consumer level through first and second charges as well as sale-and-leaseback, but eventually emerging as the banking service of choice for the future autonomous vehicle market, both personal and commercial.
It aims to replace companies such as Finova Financial in the US, which have not progressed much beyond pay-day lending, and even conventional automotive lenders, e.g. using PCP, with C2C’s USPs based on speed, size – and its intelligent systems.
The obvious social media channels are the means for C2C to link together the key ingredients of its service. These will include access to vehicle databases, valuation methodologies that can accurately pinpoint the value of vehicles and agree debt-equity ratios, datamining to identify owners willing to mortgage their vehicles, and online title determination using the blockchain wherever possible. On the other side of the deals, credit reference analysis and lending opportunities generally, often automobile loans themselves, where equity be transferred to become deposits and loans can be created.
Of course, C2C will use blogs, tweets, Facebook, LinkedIn, Pi, YouTube and Instagram posts, as well as researching and utilising fresh social media channels as soon as, or even before, they launch. Video and pictorial evidence is key to the success of the company, which will operate cross-border as quickly as possible.
But that is just using existing technology, however adaptively and innovatively. The key for C2C is to learn from its experience and adapt in real time. Decisions about the type of vehicle best utilised for the service, the structure of loan, the margins offered, as well as the marketing presence within social media will no longer rest with the individuals in charge at C2C, even their SEO advisers or marketing consultants.
Rather, the key to C2C’s success will rest with the integrated AI platform that it uses, which makes its own decisions and implements them immediately, responding in real-time to investors, lenders and borrowers alike with changes to the platform, modulated by brand, by location and by type of product. Minute changes in valuations of particular vehicles result in instant changes in marketing approach to owners as well as loan repayment schedules and even additional equity calls to prevent loan reassignment.
For C2C, social media does not function as a marketing channel – it is the decision-making process for corporate strategy.
C2C is just a hypothetical example, although with over one billion vehicles in the world, it represents a huge potential market. The lesson to be learned, though, to be analysed on banking courses in the coming decade, is very real – the future of banking rests on how AI can exploit social media to generate value.
By Julian Roche, course director, Redcliffe Training