Letting a social media company have access to your personal bank data seems about as intelligent as bringing ants to a picnic. The ants (social media) will get into everything and eventually eat your lunch.
Yet Facebook is asking big US banks to share detailed financial information about their customers, including card transactions and checking account balances. Facebook wants to use this data to offer new services to users via its Messenger chat app.
Facebook shareholders liked this idea, as the stock closed up 4.5% on Monday after the news. Others were less sanguine. Some banks have already said “no” to Facebook, citing privacy concerns.
Gary Cohn (former CEO Goldman Sachs and former economic advisor to Donald Trump) said: “Banks were more responsible citizens in ’08 than some social media companies are today.”
In my opinion (and as a former banker) I agree, but I don’t think that’s a high bar, given the damage that banks’ greed did to the world 10 years ago. On the other hand, when it comes to responsible management and protection of data, the banks are global leaders.
“Amazonification” is not just a term that applies to retail – it applies to banking as well. Big tech has made the first steps venturing into finance; Facebook, Google, Apple and Amazon already offer methods of payment. They won’t stop there. Facebook is asking for bank data because it is valuable. It would enable the company to analyze financial behavior in the context of personal behavior and preferences, in order to offer new products & services – and some of those would be financial.
Big tech already has vast amounts of data that it actively analyzes – but it sometimes can’t keep it safe. Banking also has big volumes of data that it is can aggregate, analyze and act upon. The difference between them is that banks understand the importance of data privacy and they know how to work with regulators – something that big tech doesn’t (yet!).
If banks did share personal data, they would risk two things: disintermediation from their clients as they stop using bank apps and conduct banking through things like Facebook messenger, and data privacy issues.
What if Facebook loses a client’s bank data? Who is responsible? In the litigious US, I foresee massive class action suits against the banks in the event of a breach.
Banks need to have the same kind of insight that a Facebook does - and to be able to act in real time with personalized offers like Amazon. Ideally, they will integrate banking seamlessly into customer’s lives. Excellent financial services should be like having a really good waiter – enhancing the event without being intrusive.
Banks have the opportunity to rip a page out of big tech’s playbook, with real-time customer insight into behavior coming from their channels. They could add context from publically available social media content, using sentiment analysis. The data is there, the technology is available. Surely doing it themselves is better than giving away the keys to the bank.