Getting to Know You, Getting to Know All About You...

Is it wrong for your bank to use your social graph - the personal data you generate within your various social media outpourings - to make decisions about you? Much as in the famous song from ‘The King & I’, banks hope that once they’ve got to know you, you’ll get to like them too. But it doesn’t end there. Social graph data can enable banks do much more besides. So, should banks be using this data?

Well - as with so many of these question - the answer is ‘yes’ and ‘no’ and ‘it depends’.

Banks need to tread carefully here. Research shows that younger customers are very happy to share their data with anyone (as Mark Zuckerberg said in 2010, ‘Privacy is dead’). But young customers tend not to be valuable customer and many older folks (above the ancient age of 30) are a lot more twitchy about their data. When we place our personal data into Facebook, Twitter and the like, we seldom pause to wonder if we are going to be assessed by the powers that be. Most social media is an unofficial and semi-private part of our lives that we share with a network of known and trusted contacts. So you may have clicked to follow your bank. You probably didn’t read the small print and have no idea that your off the cuff status updates, old college friends and list of random things you’ve liked may now have a material impact on how you are treated or your loan score. Having these factors used by a bank without your knowledge would feel intrusive and thus be unwanted. Research has showed that the safe keeping of personal data is one of the few areas where banks are still trusted by customers. Banks cannot afford to damage that trust in the current environment as the reputational and regulatory backlash would probably be severe.

With this huge risk, why would banks even consider using this data? Let me lay my cards on the table. I believe social graph data is the key to offering customers some really superb customer service. Just imagine, by checking your social graph data, your bank determines you have a deep passion for travel and they offer you a good rate on a credit card that offers AirMiles. Alternatively, your bank spots that you have uploaded a photo gallery called ‘my new car’ and offers you a great motor insurance deal. In both these situations - one driven by long held preferences and the other by a life event, a bank has the capacity to tailor its marketing to a segment of one. As long as this is done in a way that doesn’t feel creepy (so it needs to be transparent what data is used and why), I think this starts banks down a journey of building meaningful relationships with customers via social media. This is a good thing. American Express (as I have mentioned before) do this really well with the ‘Link, Like, Love’ functionality on their Facebook page in the US. They offer customers vouchers based on the things they or they friends have liked on Facebook.

Lenddo (www.lenddo.com), a start-up from the Philippines, also shows how much more can be done with social graph data. Lenddo evaluates a customer’s credit worthiness based on the strength and integrity of their social network. Lenddo assesses a customer’s reputation based on who their friends and family are - and how many people have trusted them to become a contact. Lenddo treats their friends and family as a form of collateral. If the customer fails to repay their loan, their credit score - and the scores of all their contacts could be reduced. In this way, a large group of people have an interest in making sure loans are repaid on time. So you can imagine a scenario in the UK. You’ve been turned down for a loan. Your bank offers you the chance for a revised decision, if you allow it to crawl your social graph data. It determines that you have wealthy and well connected friends who have been willing to vouch for you. Based on that data, your bank may reconsider, and decide to give you the loan.

So to conclude, I think it is a good idea for banks to use social graph data - but only in very clear scenarios. The use of any social graph data must be in the best interest of both the bank and the customer. Any use of social graph data must be transparent to customers - and those customers must feel in control of their data. To try an use social graph data on the sly will provoke a significant backlash - which in the current environment, banks would be wise to avoid.

If you are aware of other examples of social graph data being used by financial services companies - I’d love to hear from you!