Finance community embraces social media

Westpac, IAG Insurance, Kiwibank and BNZ see business models under threat from new online players

Banks and insurance companies are spending millions on mobile applications and integrating their customer service with social networking sites as their traditional business models come under threat from new online players.

That was the message presented by senior executives from Westpac, IAG Insurance, Kiwibank and BNZ at the recent FST Media Innovation Conference in Auckland.

Westpac CEO George Frazis says the bank is increasing its annual spend on technology 30 to 40 percent per annum over the next five years to ensure it remains relevant in the new banking climate.

“We process 400 million transactions a month, that’s over 13 million transactions a day and in today’s social media [climate], one error in those 13 million transactions a day is not forgiven.”

One of the toughest challenges is dealing with legacy systems which Frazis says are complex and stifle innovation. He said both management and IT have to step up.

“If you look at the IT executives, a lot of them are still holding onto the past, so there’s a challenge both ways. A cultural challenge and a knowledge challenge.”

IAG New Zealand CEO Jacki Johnson was initally sceptical about Twitter and Facebook until she was asked by her board of directors to start up an internet-based insurance company in Australia.

“I’d been quoted [in the media] four years ago saying Facebook and Twitter was a waste of time. I then had the embarrassing situation of being the CEO of an internet company. All my belief systems were wrong,” she told the conference.

Johnson noted that internet connectivity in Australasia will be boosted with government schemes such as the Ultra Fast Broadband network. She calculated that if a customer had a 100Mbps connection, they could download a PDF from an insurance site in 0.15 seconds. “What will that do to our products?” she asked.

Kiwibank head of online channels Peter Fletcher-Dobson says that while the bank has a customer service presence on Facebook, it couldn’t be used for transactions because “the security is only as good as Facebook’s and that’s something banks would think twice about.”

He likens the site to a shopping mall where you might sit in the food hall and have a public conversation, but you would talk about your finances – for that you’d go to a branch.

He says customers are increasingly using Twitter to air their concerns, which can be problematic. “It’s primarily being used as a channel to get fast acceleration and to be very public but effectively the customer then needs to be moved into another online area.”

Kiwibank has a web application that is optimised for smartphones and it is building mobile apps.

In his presentation the BNZ director of retail Andy Symons said the advance of technology means customers no longer have the one-on-one relationship with a bank manager or teller that had characterised banking in this country since the 19th century.

“So, two years ago we started out on a $200 million dollar journey to modernise and update our store and partner centre network, effectively using technology to rediscover the personal relationship we enjoyed with customers back in the day.

It also includes mobile managers with iPads who can grant lending approval while away from the office; This was used after the Christchurch earthquakes, when mobile teams were quickly able to secure emergency overdrafts for small business clients. Within eight weeks of launching a suite of mobile banking applications, there were 22,000 downloads of the BNZ’s iPhone and Android apps, and $27 million worth of transactions made.

Social media is also a vital platform for small business customers and geo–location will also come into play, says Symons. Customers are already starting to enjoy ‘opting in’ to this new technology by telling us where they are and what they need while they’re there.

“Very soon, they won’t be surprised when an ATM machine addresses them by name.”

See also Westpac CEO slams mobile data pricing