Social Banking: Cashing out on Facebook Accounts

A friend of mine recently had an issue with his ATM card. Some fraudulent charges had been made on his account using the card and he had tried calling his bank’s customer service line and sending emails, all to no avail. Frustrated, he posted his complaint on the bank’s Facebook page. The matter was resolved within a few hours.

Customer service is just one of the ways in which Nigerian banks have begun interacting with their customers via social media. Despite initially being slow to embrace this avenue of communication, many Nigerian banks have begun to see its benefits and some are now going further than anticipated.

In 2013, Guaranty Trust Bank (GTBank) launched its social banking platform, which enables people to open bank accounts through Facebook. With the Instant Account option, a registrant can get a new account number within minutes, without having to go to any physical GTBank location. These accounts offer limited but essential services: airtime recharge, money transfer, bill payment, and account balance requests. United Bank for Africa (UBA) followed suit in 2014, by launching transaction alerts through direct messages on Twitter. In March this year, the bank began offering a full account service on Facebook called U-Social, similar to GTBank's social banking platform.

Sterling Bank has approached social banking from a different angle. Last year, it rolled out the Social Lender scheme. Twitter and Facebook account holders who also have Sterling Bank accounts are able to borrow up to ₦3,000 each month by signing up through social media. They are charged a service fee for the loan and given thirty days to repay. The bank uses an algorithm to determine a “social reputation score” that determines whether or not the loan is approved.

The key deterrent to loan defaulters is social shame: since the social reputation score ensures that a borrower is active on social media, potential defaulters are deterred by the prospect of being named as loan defaulters on their social media accounts. Also, all friends of a 90-day defaulter are blacklisted from using the platform. So far, this seems to be working; Sterling Bank reports that it made loans worth more than ₦5 million to over 2,000 customers within the first six months, with a payback rate of over 90 per cent. Buoyed by these figures, the bank increased the borrowing limit to ₦10,000 in March this year.

While social banking is still new, if it catches on, we should start seeing some interesting changes in the way we bank. But the most immediate effects will not even be directly related to banking. Firstly, it could lead to greater "phone loyalty" in Nigeria. For the most part, phone numbers in Nigeria have been considered disposable. When people lose their phones or phone numbers, it isn’t difficult for them to just get new ones and let all their contacts know that their number has changed.

In recent times, a combination of biometric data registration with each new number, porting, and mobile money has made phone numbers increasingly indispensable. Social banking could seal the deal. This is because both GTBank and UBA send One-Time Passwords (OTP) to customers' registered mobile phones in order to enable them complete transactions on their social bank accounts. Therefore, losing a phone could now mean much more than losing pictures or contact information, and Nigerians are going to get more attached to their phone numbers and mobile phones. 

Another angle to consider is how this could affect the market for banking jobs. Social media expertise is likely to start featuring on the list of desired skills for new hires. Moreover, banks will not be looking for the “I tweet a 1,000 times a day, therefore I am a social media expert” kind of person, but people more familiar with how things work from the back-end. There will be a demand for people skilled at coding, sophisticated data mining, and automation to minimise the need for human interaction. Given that this is not currently a skill set that the average Nigerian job-seeker has, there is likely to be a salary premium for such hires. 

The demand for these skills will have a ripple effect on another sector: the market for certificate courses. Due to gaps in the secondary and tertiary education systems and the high unemployment rate in Nigeria, a large number of young Nigeria graduates enroll in courses to learn a variety of subjects ranging from Microsoft Office Applications to Project Management. These certificates come with the promise of boosting the participants' prospects and making them more employable. The courses on social media that are currently being offered are geared towards mastering it as a marketing tool. Social banking is likely to cause a shift in the focus of these courses to those that view social media as a vast pool of data waiting to be harvested and analysed.

In the process, more Nigerian individuals and businesses will start to realise an important truth about social media – that we put out a lot more information about ourselves than we realise. Information gaps, such as the absence of credit scoring, often hamper the delivery of financial services in developing countries like Nigeria. Sterling Bank has pointed us towards an important discovery – that social media may be the way to plug these gaps. 

All this is unlikely to remain limited to banking. The insurance sector in Nigeria is definitely one market that could benefit from tapping into this information stream. For now, the small scale of such activities makes the legality of such data-gathering a minor concern. However, as more businesses move in this direction, Nigeria will have to grapple with issues of privacy like several other countries are already doing. 

Clearly, this all hinges on whether social banking will be more than a fad. Are more banks going to take the leap? The answer seems to be yes, because social banking is likely to be the key to roping in millennials while they are young. People aren’t quick to change banks, and even though young 20-somethings are not yet earning the highest incomes, they will be within the next two decades at most. Banks that are able to gain their loyalty now could reap the rewards down the line and if social banking gives GTBank, UBA and Sterling Bank an edge, their competitors won't want to be left behind. 

Of course, in the process we hope to avoid “the Nigerian effect” when all else is forgotten in favour of shiny new things. While it is nice to be able to get quick customer service on Twitter, banks need to be careful not to neglect more traditional communication channels, or they may risk alienating their core customer base.

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