the social revolution: why systems must change
I guess I would be on pretty safe ground if I was to say that the Internet has brought a sudden and dramatic change in the systems around us. We’re now empowered.
But think about it. This isn’t just evolutionary change. This is a revolution. We’re witnessing a shift – a paradigm shift in our sphere of influence.
I’m not talking about system usability or about the features we’re offered. This is radical. The driver of all these systems is being swept away by the tide. There are new owners. These will be social systems, driven by the system users themselves.
The logical extension of the Industrial Revolution
We used to do as we were told. But just as mechanical machines put the capacity to move, make and build into the hands of more people than before, so technology gave it to us all.
That sounds dramatic. But let’s look at a real-world example. Lets look at banking, because banks controlled wealth and therefore society. The chart below is a timeline. It starts before the early automation of banking and takes us through today, into a possible tomorrow.
The red area along the upper left depicts the influence of the service provider, the bank. The lower level shows the user, you or I. The coloured blocks, our controls.
The swing begins
Follow the line to 1967 and Barclays introduction of NCR’s new idea, the ATM. The banks thought ATM’s would just save them money. Allow them to employ less people.
What the banks didn’t realise was that ATMs gave us some control of the bank’s systems. We became self-tellers. We could remove our own money. A small step, but a crucial one.
ATMs let us take our cash from an ATM, anywhere. Consider this. Before ATMs, TSB customers (now part of Lloyds Banking Group) could only withdraw from their own branch. ATM’s were seen as truly radical!
It would be nearly twenty years before we’d get a chance to see the next step-change. Again, the banks thought they’d save money. This time, it was PC-banking.
Our first personal financial network
PC-Banking took control to the next level. The micro computer had arrived in our homes. We had the BBC Micro and the Commodore-64. And a short-lived service called Prestel. We had our first network, connecting us to our bank’s systems by a phone line.
We could arrange payments, check our balance. We could act like the bank’s back office. Now we were into the bank’s systems. The bank’s still didn’t realise what was happening. They could still only see the cost savings.
Enter the Internet
An extraordinary set of circumstances saw the appearance of Internet Banking in 1994. The bank’s weren’t slow to capitalise on the opportunity to trim their costs once more.
We could transact between banks. The banks fell over each other to give us more access. Once more, we were handed more control.
Social Media arrives in Banking
Thirteen years after giving us Internet banking, the banks finally began to realise they were losing control. They complained about increased costs, about the end of free banking. They started charging students overdraught fees. But we’d just discovered Social Media. Banks were about to hear our voice. And it would be a very loud, collective voice.
A campaign on a new social site called Facebook forced one of the world’s biggest banks, HSBC to suffer an embarrassing climb-down on student bank charges.
Credit Crunch and Crash
The banks now created another problem. They pressed their own self destruct button. They inflicted so much damage on themselves that any chance of a pull-back from the abyss they’d created by the simple introduction of ATMs back in 1967 had gone for good. In so doing, they ushered in another new age.
The age of the boutique bank
This year we’ll see the new breed of bank. The first offers to us using a brand new model.
In the last few months alone, Tesco, Virgin, Metro Bank and Walton and Co will become the new face of banking on our high streets and through who-knows-what-else medium.
One of these new players will build the new City. One will do something radical once again. But I’ve reached the point where I’ve no history to point to for my story.
We’re at the point where you write the next chapter. Its not about just having an opinion or a choice. You’ll shape what will come. You’ll become the new system owners.
And the winner is… YOU!
All I can say is look at that chart once again. Look at the next stage blocked in at the right. Its a grey area, because I don’t know what it will be yet.
I don’t know because you haven’t told me how your banks will work, what they’ll do for you. All I can tell you is you’ll own the next stage. It’s your move. These will be your systems. Control will be yours. This will be your social bank.
on March 1st, 2010 at 5:17 pm
Hello Neil,
thanks for your nice comment on my input to Finextra today !
Reading through your blog here I can see your line of arguments, but I fail to see that bank customers would be really empowered today or anytime soon. Rather, more than ever us ordinary citicens are at the mercy of the banks …
They did not actually press the self-destruct button, rather they just became to risk-loving and greedy and were blown off the cliff. The governments in many countries – acting on behalf of their humble citizens – had to reach out and grab the banks before they – and world’s economy – were smashed at the bottom of that cliff.
We, the ordinary people, laid down on our bellies and pulled the bankers up again, using a humongous amount of tax maney that by the way has not been paid yet – we still will have to pay for many years to come. So we are still lying on our bellies, the bankers quickly stood up straight again, did of course not say “thank you” but dusted off their fine clothing and are now continuing the same way as before.
Maybe you see some more competion in retail banking in the UK these days, but overall I can’t see a shift in power. The governments miserably failed to invoke those kind of controls that would be necessary to stabilize the world. There is just way too much artificial money floating around the globe, not backed by goods or services delivered in the real world economy.
The next financial crisis will probably come up soon, and I suspect this time it won’t be overrated mortgages but the ever faster spinning crazy wheels in those casinos where low latency / high frequency trading is currently the name of the game. These wheels are spinning so fast now that there is no way at all to check whether the players are playing according to the rules. So they won’t, and we will see the results … and we will be held hostage again, paying even more trillions to compensate for the resulting losses.
Have a nice day …
on March 1st, 2010 at 6:24 pm
Hi, Gerhard!
I can’t disagree with any of that – if we’re talking about conventional banks with no social networking response channels. Which you’re right, is just about all the mainstream banks.
But I reckon these guys are finished now anyway. I’m looking at the new banks and those older ones who will embrace such channels, like First Direct with its Little Black Book.
I was looking at the push into the banks core that began with ATM connectivity and continued through PC and Internet banking. I do feel that’s a trend that will eventually lead to us creating our own banking systems.
Your argument would be an entirely valid one had it not been for the choice these new banks are potentially presenting us with.
Who would stay with LBG or RBS if a bank said to us, “tell us how you want to bank and we’ll try to accommodate you.”
Far-fetched, I know, but I think it will come. When it does, I’ll gladly help push the others back off the cliff again!
on March 4th, 2010 at 10:54 am
Social Media simply gives the population a collective voice, e.g. in the case of HSBC that meant that negative PR associated with it’s actions were the bigger driver, but the power of technology gave it the push. i.e. without Social Media the difficulty of mounting a campaign would have been infinitely harder and probably doomed to failure.
There are a number of questions that don’t fully yet have an answer and it’s this; what do we as Banking Consumers actually want from our bank for the future?
Is it more social interaction with our banking provider? Or is it simply better product in terms of getting the best rates for savings and loans? Or is it better access to our money via tools? e.g. Rich Internet Apps, Mobile Banking, Smartcards etc?
The new breed of bank, e.g. Virgin and Metro Bank are currently focusing on Retail, but where do most of the profits come from? Not retail!… so we’re back to the Investment Arms of banking to generate the largest profits and ultimately the payback demanded by shareholders.
Can Social Media influence that?
on March 4th, 2010 at 11:35 am
Hi, Jamie.
A well considered response that contains many valid points. I’d like to expand on a your main argument, if I could.
We talk about social media as a method to get our view across or for a company to measure its popularity. Certainly that’s a key component. But its becoming so much more.
Did you know that before the current UK/US push against the Taliban in Afghanistan, they ran a social media campaign to ask what the Afghans themselves wanted them to do and where they should aim it?
The idea was to ensure they won hearts and minds and not just the military battle.
So, social media can shape design itself. Design is very much subject to the laws of Darwin in that if something works, its grows, if it fails, it dies.
With social media, we can ask which system do you want, A, B or C?
We can even say “bring me your ideas. Bring me D.” This is what crowdsourcing is all about.
Once we’re into that, we are socially designing systems. My chart in the post pointed to the way that control within a company (a bank in this case) is extending and reaching closer towards management itself. The logical end point being the design itself, the 100% reach.
Now, your view on Investment v retail banking. Your view is a popular one and held by many pre-crash. I’m not saying its wrong, but that two factors question that logic.
The first is that every big bank has a high street presence and that costs a lot of money to maintain. Yet each one also has a strong investment arm.
I see no evidence of any one of them pulling back from retail, in fact everyone is looking to grow their retail effort. Why, its its no profitable?
Secondly, any observer of the events pre, during and post crash saw that the majority of investment positions where not real, they tumbled like dominoes once the tip of the tail wobbled. There was no real money to support it, no real gains made. If not, why the bailouts?
The real money came from the profit of movement of funds. Once that movement ceased, the money went. Profits made currently are from the injection of TARP and UK bail-outs.
The pedigree of those starting the boutique banks are impeccable. They could have gone into investment banking – after all, that’s where the money is supposed to lie, isn’t it?
No, they went into retail. Now whenever you launch a product, you make damn sure its what your customers want to buy. Today, that’s what social media can provide.
If you then get someone to design those systems for you through crowdsourcing, you get a triple payoff.
You get systems designed at low cost by the biggest design group in the world – the world itself.
You get systems you know people want because they chose them.
You get a low risk marketing effort because you know pretty well it will be accepted by your target market.
So the answer to your final question is that social media is not some disenfranchised protesters kicking off. Its the voice of the shareholders themselves. And what’s a shareholder vote if it not social media in action?