Facebook Does Not Want To Be Your Online Bank

CNNMoney recently published an article titled Facebook wants to be your online bank. The article has garnered more than 1,000 tweets and more than 900 people clicked on the Facebook Recommend button.

Given many people’s habit of clicking on these buttons based simply on the title or after having read just a paragraph or two (recall that TV commercial where the girl says “I read an article online — OK, I read part of an article…”), I can’t help but wonder if many really knew what they clicking about.

My take: The title of the article is way off the mark. The article isn’t about Facebook becoming an online bank, and I find it hard to believe that Facebook harbors delusions of becoming one.

The article is about Facebook becoming a platform for banks to provide transaction and interaction services. According to the article:

“There are certain things, whether itʼs financial services, or banking where I donʼt necessarily want my friends to know exactly what Iʼm doing, right?” David Robinson, Facebook’s director of global marketing solutions, U.S. financial services, asked a crowded room of bankers at a SIFMA seminar in New York last month. “I want to be able to go in and have an experience with my advisor or my bank and have that be a one-on-one experience.”

Facebook is quietly planning just such an offering with Australia’s Commonwealth Bank. Currently in an internal beta, with the first version built in March, the application is expected to launch sometime this year to customers. It will allow Facebook users who are bank customers to make payments to third parties as well as Facebook friends through the social media channel, according to the bank. Commonwealth will secure transactions with its own authentication system — similar to how payments are secured on its online and mobile banking site, a spokesperson says.”

There’s a lot wrapped up in those two paragraphs, but none of it points to Facebook becoming an online bank.

If Facebook wants to become a platform where investors can  have a “one-on-one experience” with their advisors, it should think again. In the research that I and my colleagues have done on investors’ needs, desires, and preferences, never have any meaningful percentage expressed an interest in engaging in “one-on-one experiences” with their advisors on Facebook. And by “meaningful” percentage, I mean ONE percent.

Considering what Citibank has heard from its customers, the prospects of Facebook becoming a platform for banking transactions doesn’t look too promising, either. According to an article on the Bank Innovation site:

Citi asked consumers through its official Facebook and Twitter channels: If you could do your banking on Facebook – Would you? As of 2:30pm ET July 16, the majority of commenters wrote that they would be reluctant to do Facebook banking because of security concerns.

I particularly like the response from one Eric Bathke, who said “over my dead body.”

What’s important about these responses is that the sample is skewed. Remember, these are responses from people already interacting with the bank through social media channels. If the people who interact with the bank today through social media — and the number is pretty small — don’t want to bank through Facebook, what do you think the chances are that people who don’t currently interact with the bank through Facebook want to use the social network for banking transactions?

Bottom line: Three conclusions here:

1) If a bank marketer’s rationale for developing capabilities for its customers to conduct banking transactions on Facebook is “we want to be where our customers are”  then s/he should be fired for gross stupidity.

2) Facebook doesn’t want to be an online bank. ING Direct is an online bank. It offers banking products and services primarily (but not exclusively) through the online channel, and there’s no way in hell that Facebook would place that kind of business opportunity high on its list of opportunities. NOBODY wants to be a regulated financial institution in this environment. 

3) CNNMoney needs a new editor, a new writer, or both. The title of its article is so misguided that it makes me wonder if anyone there has any real knowledge of the financial services business. The lack of detail about the payments (retail and P2P) prospects for Facebook is where the real story is. 

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