Day of Reconing, SecondLife Banking will be no more

In my post, ”How soon before there is a Web 2.0 retail bank?“, I mentioned that Wells Fargo is taking advantage of SecondLife by building an online community and educating consumers on their products.  As we will see, that is one of the smart way to wade into the Web 2.0 banking arena.  Until an institution can decide how they want to deliver products and services, based on the feedback they get from their customers, the education option is the safest way that any established institution should be exploring.  I’m bringing this up because SecondLife has banned banking from its site effective Jan. 22nd as reported by TechCrunch.   These “banks” that were actually accepting transactions only existed in the virtual world.  The problems and fraud causing this shutdown echos what is said in Bank Systems & Technology by Maria Bruno-Britz that “accountability is so important in financial services” and myself, in the above mentioned post, where I talked about an institution’s reputation and dependability.  Trust and reliability are the lifeblood of a successful financial services.  This isn’t to say that your bank can’t go out of business.  However, some government agency is always looking over their shoulder to make sure they are obeying laws and regulations.   When the marketplace advances very quickly the regulators and legislatures react after the Wild West effect has taken place.   What we are seeing here is that the market is self regulating and SecondLife has done the smart thing and shut this service down before any more bad press can hurt their reputation. 

If this story gets into the mainstream press it has the potential to continue to leave consumers with a bad taste for web based banking.  This is especially true if consumers can’t draw a distinct line between the different offerings from various institutions and instead see them all as the same.    

The question remains, who is going to be the leader in the Web 2.0 banking world?  To this I think there will be no one answer.  Each bank or credit union will probably adopt some of the new technologies to fit their market and customers as the need arises.

Maybe my name should be “Carnak”

A funny thing happened while I was in the process of writing my last blog post.  Zopa teamed up with a list of credit unions in the U.S.  Now, part of this strategy is marketing based, to get their name out there and to make a presence.   But, a big part of it is also market based.  As I stated in my last entry until they had a way to tap into the wider market Zopa would stay a minor force.  This strategy also gives Zopa access to an existing funding source with an established market presence, in the form of their CU partners. 

Based on the following quote the forward thinking institutions, like these CUs, recognize that they need to do something now to tap into the needs of Gen Y, “The merging of financial services and social networking is a great way to reach the younger generation,” says Doug True, senior vice president of FORUM Credit Union of Fishers, Ind., one of Zopa’s launch partners.   I applaud Zopa and their credit union partners for attempting to get the ball rolling and experimenting with new products for the market.  Again, to reiterate what I mentioned in the last post the cost of establishing a program like this isn’t very great.  Not to mention, by being new and innovative they are getting a lot of press, me included, off of this offering.  The jury is still out as to whether this will be successful.  There are a couple of barriers to wide acceptance.  The first question is, will a large enough segment of the general public want to get involved and be direct lenders to strangers, in order to make this a worthwhile program?  How about the timing of this offering?  With all of the credit issues in the news lately will this also put off potential lenders?  Most of the market of potential borrowers, for these high rate installment loans that this program is offering, are exactly the same people that are having difficulty today making mortgage payments.   The best I can say for now is “stay tuned”.

Getting back to the subject of Gen Y…

They may be youngest generation in the workforce right now and yes, they take to new technology and social networking easily.  However, they are still just consumers who want the same service like everyone else.  Heather Peters of Pleasanton, CA based Javelin says, “It is a common misconception that Generation Y is a web- or digital-only generation who sees no value in face-to-face interactions or traditional channels, such as ATM, branch or phone…”.  As most of us who have been in the industry for any period of time will attest, this is one area we can improve on.  There are many reasons for some quality deficiencies in our industry and I would be interested in hearing your take as to which ones are the most critical and how they can be addressed.

Lastly, I would like to point you to a very good blog post I ran across from Tim McAlpine’s entry on the Open Source CU site.  He also touches on a lot of the subjects I’ve spoken about here.  The main one being, no one in banking organizations in general are taking ownership or sees the importance of these new ways of doing business.