IT News reports that ANZ CIO mulls 2012 challenges, competitors but I'm puzzled that the "challenges" appear so routinely operational. In a world which is uniquely being buffeted by the major mega-trends of cloud, mobile, social enterprise, and unified communication, not to mention consumerization of IT, I would have thought that the challenges would have been far more substantial than just tickets to the game.
In a world where Facebook is better equiped to operate a secure, reliable bank than the Banks are, then a focus on the routine operational tasks - a focus which is predominately inward - is surely not going to deliver the future of banking.
According to the report ANZ CIO Anne Weatherston named "systems availability and security, costs, business alignment, change management" as the 2012 challenges. Really?
I'm puzzled by this report on a number of fronts. No doubt Bank CIOs have challenging jobs. But what really struck me about this list of "2012 challenges" is how operational they are.
THAT is the pot of big challenges? I'm struggling to see what are different in those to the last 20 years, and since they have been the same challenges for the last 20 years why aren't they just a ticket to the game.
I'm not being bold enough to say why aren't they solved, because they do remain a challenge as things evolve. But in another way it could be well expected that they are solved, in the sense that it is just the ongoing day to day management issues which should have processes to cope with new threats and challenges i.e. the risk management and governance should be well and truly solved, and hence these issues are just tickets to the game and not the actually game. Isn't that a reasonable expectation?
I'm further confused about "business alignment". I've seen so many articles in recent years saying that business alignment is all done, furthermore it is an insult to any IT department or CIO to even raise it at a meeting, breakfast or seminar because sure as night follows day they are fully integrated with the business and on top of this passe issue.
Even furthermore they say that even using the phrase implies that IT has been or is "outside" the business, and that is not the case among them. And some articles have expressed their anger at this topic still being on the speaker circuit and consultant agenda. I noticed this because I'm a little less convinced that business alignment is done and dusted. But never-the-less I'm surprised that it's openly on the list of ANZ challenges for 2012. Perhaps I should be pleasantly surprised!
Finally, there's no doubt about the game changing outsiders - the barbarians at the gate. We desperately need more competition, as the Chinese kindly pointed out yesterday.
But I'd be keeping my eye on Facebook far more than Google, and even Paypal. That why I wrote Facebook Credits - 5 things you should know. Additionally Facebook can keep it's systems running and secure for 750 million, something, with the greatest respect, is beyond the ken of the Australian lead banks. This is not a cheap shot, it's recognition of the fact that our Austalian banks are even struggling just to keep their systems operational let alone create new business.
Finally, I'm surprised that nothing of social business was mentioned. We're right bang at a point where business and IT leaders are struggling to figure out specifically where social media functions belong, both in terms of 1) delivery platform as well as 2) organizational capability. And at this point, organizations are realizing they have to put some serious thought into making organization-wide sense of social media service delivery. This, to me, is a huge challenge and one relevant to bank CIOs and their core enterprise architecture. But this one went AWOL from the 2012 list?
What do you see as the greatest IT challenges for banks in 2012?
Whether you're playing FarmVille, FishVille, or PetVille, you probably use Facebook Credits - the virtual currency launched June 2010 (but the program as a whole is still in beta). Facebook last Thursday announced it is expanding this program to include more payment options and access for more developers. And as the number of services offered on the Facebook platform grows, this means growth for the Credits business also.
There is more to Facebook Credits than meets the eye, and here are 5 things you should know to help explain their importance:
The objective is to build a Universal Virtual Currency System;
The objective is to build a Universal Virtual Currency System;
The objective is to build a Universal Virtual Currency System;
The objective is to build a Universal Virtual Currency System;
The objective is to build a Universal Virtual Currency System.
Just kidding! But only just, that's an amazing ambition which I'll write about in another post. Here are five things:
The objective is to build a Universal Virtual Currency System;
Users can now buy premium items and virtual goods in within apps and games via Facebook Credits paid for with prepaid store cards and gift cards;
The PlaySpan deal, using it's UltimatePay global payment processing service, allows Facebook Credits to use popular regional methods like prepaid cards.
This is a move which will take the whole micropayment movementmainstream, and global.
Facebook will rapidly dominate the virtual economy, potentially ramping up to 500-times Second Life's virtual economy in a very short time.
It's a transitional moment for the virtual economy and also micropayment systems.
Universal Virtual Currency System
The OBJECTIVE is to build a Universal Virtual Currency System, which is more portable than any game or publisher-specific system, and acccording to a report from Venturebeat, Facebook Credits' product marketing manager Deborah Liu used the Euro as the physical analogy!
That's an astounding ambition, since so far all other efforts - like those built around micropayment systems - have fizzled out or remained totally regional or not achieved any significant economic penetration. Since 70% of Facebook's members are outside of the US then the Facebook Credits system was born global and for that and other reasons this objective is feasible. It's now a matter of how it can be achieved and sustained.
Kiss goodbye to the Big Mac Index and welcome in the Facebook Index - how much Facebook Credits cost in each currency.
Buy with pre-paid store and gift cards
Up to now Credits could only be bought via popular credit cards, PayPal and mobile phone and many game developers had already set up virtual currency alternatives before Credits were available to them. Users can now buy premium items and virtual goods in within apps and games via Facebook Credits paid for with prepaid store cards and gift cards.
That's very mainstream for a virtual economy, as mainstream as a Visa gift card. Facebook will also benefit from people failing to redeem their purchased cards or leaving unredeemed value on the cards, which can run as high as 15% of cards and/or value. Look out for the FaceCard as a stored value card.
"Our goal with Facebook Credits is to give people that use Facebook an easy, convenient, and trusted way to buy premium items in games and applications, while creating unique opportunities for developers to build successful, sustainable business," George Lee, a product manager for Facebook Credits, wrote in a blog post.
Playspan
The PlaySpan deal, using it's UltimatePay global payment processing service, allows Facebook Credits to use popular regional methods like prepaid cards (e.g. Europe's Wallie-card, Taiwan's Gash card) and other options (e.g. bank transfers in Germany, Brazil’s Boleto Bancario), along with traditional systems like PayPal and credit cards.
PlaySpan is possibly more important than first meets the eye. It's not just a simple extension of reach. It is a crucial part of meeting Facebook's global ambitions for Credit as a currency. PlaySpan's offer is a "Monetization as a Service" (MaaS) offer which brings cost-savings, scale, and flexibility to game developers in which they would otherwise have to invest (as they have up to now for their customized credit systems, see above). PlaySpan's MaaS platform cuts developers costs, and provides better control which at least acts as a partial offset to the 30% fee on Credits which Facebook takes. (PlaySpan was founded in May 1, 2006 and has had funding of $46.3m to now.)
Micropayment movement mainstream
I think that Facebook Credit signals the transition of the chaos of the micropayment movement into a mainstream, global force. The start of a significant shift. (And part of this is due to the "Cloud Shift", which I won't go into here but is where the real cloud comes into play in business transformation.)
It's fair to note that previous brave forecasts about the impending success of micropayment systems have all had to have been erased from their author's Linkedin Profiles.
For example, Jakob Nielsen, in an essay The Case for Micropayments wrote: "I predict that most sites that are not financed through traditional product sales will move to micropayments in less than two years," and Nicholas Negroponte made an even shorter-term prediction: "You're going to see within the next year an extraordinary movement on the Web of systems for micropayment ... ." He went on to predict micropayment revenues in the tens or hundreds of billions of dollars.
Alas for micropayments, both of those predictions were made in 1998!
None-the-less I say look out now for rapid and significant new innovation, and a whole raft of legal and tax issues which will make the law run to catch up with reality, yet again.
PayPal has also added to the momentum with it's recent announcement of an enhanced micropayments product (since their current one hasn't taken off). And imagine when Facebook members can transfer funds to each and cash them out! The impact on banks and credit cards is likely to be significant. Look out for FaceBank !!
Issue: if Facebook is in control of the funds float, are they a deposit-taking institution and therefore should they be subject to all the banking regulations and controls that govern traditional financial institutions?
Facebook will dominate the virtual economies and micropayments
There are other virtual economies, such as Second Life which reports that it's doing a booming business and its virtual economy is currently the largest in the world. But it and all others will pale rapidly compared to Facebook (Second Life has about 1/500th the membership of Facebook).
In the game community Credits will dominate almost immediately. For example Zynga and Facebook engaged in a five-year-long commitment in May, agreeing that Facebook Credits would be the exclusive form of currency used for all Zynga games hosted on Facebook. Zynga has the largest marketshare of the three major U.S. competitors with 221 million users.
It's in the non-game - the other virtual and micropayment segments - where the astounding potential lies. In this case Facebook becomes the aggregator of purchases and settles with its suppliers, and of course it will have to drop its fees from 30% to let's say 3% + $0.10 for these non-game type micropayment transactions especially for those less than say $1.
Facebook Credit could feasibly take control of small person-to-person transactions with a firm hand. It won't wipe out the many successful mobile micropayment systems like those which operate in the Philippines, Bangladesh and parts of Africa. But it will open up new regions and complement those systems in areas/geographies/demographics where smart-phones have a critical mass of penetration.
It comes down to this. What Facebook and PaySpan now have is a collaborative micropayment system - a hybrid micropayment system that can interface all existing micropayment systems. While PayPal has had a micropayments system ,it hasn't reached any critical mass and it doesn't appear to be linked to any virtual currencies. It is also limited in its means of payments. Facebook plus PaySpan eclipse this.
And the fabulous thing is that it does not belong to the banks or the telephone carriers.
Facebook will become the dominant point at which payments are coupled with content deliveryand it already has a relationship with 500m members. That's kind of a revolution, because almost universally it was predicted that micropayments would not take off without the cooperation (read control) of the banks, or telcos, or ISPs for example.
That's no small market. VISA estimates that up to 25% of total consumer transactions are for $25 or less. That figure of $25 is bigger than the Wikipedia definition of a micropayment up to $10 but Facebook is not restricted to micropayments - solving micropayments is just the first step.
A potential Facebook e-card would rapidly dwarf the 15million or so Octopus ecards currently issued, which is often used as the benchmark for the "most widely used stored value product". (That's not correct of course, mobile phones with built-in contactless stored value cards far exceed that number in each of Japan and Korea.)
Is Facebook being too greedy?
Let's look at two aspects of "greed" in relation to Facebook Credits. Firstly, the global ambition to become the universal virtual currency. From my point of view, no it's not being too greedy its simply being ambitious and it is what others like the credit card issuers and banks would do if they could.
In general the banks would never be able to do it, for one reason because as has famously been said "no one wants to be friends with their bank on Facebook". That says everything about the view of the relationship people have with banks.
On the other hand it's inherent that if you are on Facebook then you want to be there, and the stats show that you spend a lot of time there. There's also another reason - 99% of the world's banks don't understand cloud computing. They understand so-called "private cloud", which is essentially a delusion, and that delusion keeps them from understanding how Facebook and PaySpan have hung them out to dry - because Facebook and PaySpan do understand the real cloud.
So while the banks have all been busy awarding themselves innovation prizes and swanning about in self-admiration of the complexity of their IT operations silly little Facebook has jumped the hurdles that need to be jumped on the road to a universal virtual currency. These aren't small things - security, privacy, logistics and the Cloud Shift. To be fair I guess that the banks do provide an efficient and effective processing system with a reasonable set of commercial and legal safeguards for all parties, and the virtual currency journey has a long way to go yet in that regard.
That said, we could guarantee that a companies like Visa and Mastercard have repeatedly examined the feasibility of how to massively expand their own virtual currency and micropayment efforts and ambitions, but haven't yet found the platform to achieve and sustain it. (See Visa recently acquiring Cybersource to tap into mobile payments, and MasterCard with its Open Platform and acquiring DataCash.)
The other "greed" question is with regard to fees. Facebook takes a 30% cut of all Credit transactions. Contrast this to Second Life who say that they charge an "exchange rate" on the virtual currency that is used for in-game commerce but they do not charge a commission on in-game commerce.
However the 30% fee is the same as Apple charges for their App Store, the same as Nokia's Ovi store, and less than the 40% or more that the telcos rip from developers for their app stores. So it's in-line with the industry for apps/games.
Although some game publishers reacted negatively to the size of the fee it is reported that those who have implemented Credits have seen a big lift in game revenues. Deborah Liu has said that at the moment only about 1% to 3% of users spend money on free-to-play games and is expecting that Facebook Credits will increase that range up to 8% to 20%. Which means plenty of new income for game companies, even after the 30% fee.
Conclusion
Combined with the new Bing search deal, it's clear that Facebook has designs on specific "Cloud Shift" business-transformational strategies for the future. Think of their Social Graph, how that has spread the Like button like wildfire, and the other widgets. Then add in a "Facebook Payment" button with access the to same networks and Social Graph - it's huge! Just think more, of the millions of people who use Facebook as an online photo repository, Facebook Credits is a huge hint that Facebook has some very expansionist plans for its future.
"..increasingly detached from material embodiments, capital and money alike change through history, moving by stages from totally tangible to symbolic and ultimately today to its 'supersymbolic' form. This vast sequence of transformations is accompanied by a deep shift of belief, almost a religious conversion – from a trust in permanent, tangible things like gold and paper to a belief that even the most intangible, ephemeral electronic blips can be swapped for goods or services."
Speaking about the change from using animal skins, salt, land and goods as "currency" to the beginning of the use paper money, Toffler notes that "unless a person believed that others would accept paper, and deliver goods for it, it had no value at all". Think of diamonds, which are intrinsically worthless stones whose popularity and value are a recent creation, the result of a concerted marketing efffort by a monopolist cartel which created a belief that diamonds "are a girl's best friend".
In many ways, the advent of micropayment and virtual currency systems clearly reflect this progression in the belief system, which will underwrite the potential shift in commerce heralded by Facebook Credits. Facebook could hardly be as evil and artificial as the diamond trade, and they no doubt have the same intellect, vision, drive and propensity to act as De Beers, and therefore I think that they have a very good chance of shifting the belief system further, in line with Toffler's model.
Do you think that Facebook Credits has this same kind of significance?
Will it become "the" Universal Virtual Currency, if not why not?
How can micropayment systems best benefit from working with Facebook Credits?
ASB Bank's Facebranch, said to be "the first 'Virtual Branch' application of its kind to be launched by a bank on Facebook", isn't especially interesting to me for its Facebook functionality but rather for its fronting up to the usual corporate fears of social media.
The three most common themes among business executives hesitant about social media are still:
How do we "protect" the brand?
What control do we have over people saying bad things about us?
How do we control what our staff can say?
Bad Banks recently nominated ASB Bank for the 2009 Roger Award, given annually to the "Worst Transnational Corporation Operating in Aotearoa/New Zealand". Bad Banks also has ASB prominent on their Bad Banks Facebook Page. So in the face of the flaming in social media and on the streetagainst the ASB Bank you'd think that their executives would be reluctant to open up for more.
But not so, and good on them.
Even more surprising since they are wholly owned by the Commonwealth Bank, one of the big four Australian bank oligopolists (Commbank, ANZ, NAB and Westpac) where service innovation is an oxymoron - in the main comprising waves of PR campaigns masquerading as consumer service and information. (Through I have to admit the ANZ's Barbara the Banker campaign and ASB's Goldstein are cute PR.)
There's a good review of ASB's Facebranch on Christophe Langlois' Visible Banking blog, where he calls labels it Facebook Branch 1.0 because of its shortcomings, while giving it couple of stars for effort.
I'd think ASB is well aware of the basic state of the current initiative, but it still serves them well, and it opens a channel and a challenge for them to now get to more fully understand. There's quite a lot of design thought gone into this effort and it all hangs together quite well, including the avatars.
Let's face it, if more businesses took this first step of getting Facebook integrated into their customer service in a well thought through way, as ASB has done (they're running a dedicated team of 8 staff in FaceBranch) then it would a huge step forward.
"We believe this is the first 'Virtual Branch' application of its kind to be launched by a bank on Facebook, anywhere in the world," says Anna Curzon, ASB’s general manager of internet banking. "It's really exciting for us to be able to run this application on Facebook and we're working closely with our customers to understand more about what they want from us in social media."
Just as a quick comparison to other banks and their social media efforts, Citi and 1st Mariner and USAA® (USAA Federal Savings Bank) and Mechanics Bank are among those recently quoted as having advanced digital and social media efforts here are some factoids:
ASB Bank's FaceBranch has nearly 5,000 fans now, a few weeks after its launch;
Citi, for all its marketing might and global presence has 3,500 fans of its Facebook Page, which is just a Wall and with only 2 entries since March 2009;
1st Mariner, "proudly located in Baltimore" home of The Wire, has a much more active Facebook Page than Citi and provides more content - such as branch locations complete with FourSquare links (neat!) and videos from the managers - but has only managed to attract about 1100 fans;
The USAA Federal Savings Bank prides itself on being innovative, and according to it's Facebook Page was just named the was named Best in Class for mobile banking "for the second year in a row". There is no doubt that their FB page is far more advanced than ASB. Its My USAA tab/app is the whole box and dice of Internet banking integrated into Facebook. There's lots of activity, with the exception of Discussions which seem to have fallen through the cracks, and there are over 100,000 fans of this bank! Impressive. But in any case let's take ASB's FaceBranch claim at face value, there is room for everyone in these innovations.
Mechanics Bank is a little off the Facebook scene, as I found them hard to find and that they have not even taken advantage of their potential short name facebook.com/mechbank (as in www.mechbank.com) but they do have a Facebook Page with 28 fans. It has 3 posts for this February and none since. I would think that a business like Mechanics Bank would really be able to capitalize on their community connections and make their FB Page a real source of connection and business. They have plenty of content on their website.
As far as other Australia NZ banks go, just as a quick comparison, I couldn't find any Facebook Page for ASB's owner the Commonwealth Bank; Westpac has 74 fans; the ANZ doesn't appear to have a Page although their "Barbara the Banker" PR campaign has a user page with 166 fans; the NAB doesn't appear to have a Page but it's wholly-owned U-Bank has nearly 5,500 fans - U-Bank has a strong social media presence since it is an Internet-only bank. In New Zealand none of the ANZ National Bank, the Westpac NZ or the Bank of New Zealand appear to have any official Facebook activity, at least none that appeared in my searches.
So the ASB Bank stacks up very well considering their FaceBranch is only a few weeks old.
Hat's off to ASB, I like the effort and it's part of a shift which is important for business.
Rather than inventing a whole lot of "Facebook Branch 2.0" ASB is going to listen to their customers, from the perfect vantage point of their Facebook Branch 1.0, and develop what customer's feel is most useful.
To me, businesses are severely underestimating the power of Facebook as an adjunct to their digital engagement, especially services businesses, and I can only say again that if they got their minds around the step that ASB has taken then they'd see potential for themselves. I'm especially interested in how small and medium businesses can use Facebook for eCommerce and migrate that aspect from their current websites.
Which bank have you seen with the best Facebook presence?
What is the best use of Facebook for SMB and eCommerce/Customer Service?
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