RBI deputy governor, HR Khan, at a September 16 presentation in a conference in Mumbai, specifically underscored the need to leverage social network updates as an additional know-your-customer (KYC) tool.
Banks should leverage on the increasing popularity of interactive social platforms for effective engagement with their customers, Khan noted in his presentation, adding that by tapping social networks, banks can access customers social profiles, and thereby deepen their insights into individual customer behaviour.
While this concept is still in its nascent stages in India, private sector banks are emerging as the front runners in deploying this as a tool. In the developed nations, lenders are already using social media updates of customers as an additional input in determining a borrowers identity or creditworthiness.
HDFC Banks head of marketing, Kartik Jain, told The Indian Express: Social networks such as Facebook allow you to identify and target customers based on specific segmentation criteria such as lifestyle, demographics, interests, location etc. We have mapped our customers and their banking transaction behaviour, with their social media profiles and device usage. This has allowed us to show more relevant and meaningful messages to customers in a medium that they are comfortable with. For instance, a message for instantly downloading our mobile banking app is shown to our savings account customers while they are accessing Facebook on their smart phone.
An executive with another private sector bank said that bank staffers have also been asked to sift through data, especially for high networth individuals, to look for potential red flags including applicants putting different job information on their loan application as they posted on LinkedIn, or a post on Facebook disclosing a firing by an employer.
A senior officer with a public sector bank said the RBI has informally sounded out lenders to work on developing skills to mine social media data, including deploying agencies on a contract basis.
The use of information posted on social media sites is being advocated in addition to the CIBIL (Credit Information Bureau India Ltd) rankings that lenders use currently to determine the credit-worthiness and past default history of individual customers.
Private sector banks, which have seen progressive surge in online transactions led by the rising number of Internet users, are already using Facebook and Twitter to allow customers to transact online, and open new accounts.
Kotak Mahindra Bank, for instance, on March 26, started a current account that allows customers to open new accounts and transact using their Facebook log-in identity.
The RBI has taken the lead in some groundwork in the ways of using data posted by individuals on the net. The Institute for Development & Research in Banking Technology (IDRBT) a banking research institute established in 1996 by the RBI has already prepared a Social Media Framework for Indian Banks that offers comprehensive insights into the use of the social media by the banking industry from recommendations to a governance model, security implications and a social media checklist for banks.
The guidelines, under the head of Leveraging the guidelines mentioned in KYC (know your customer) norms/Anti-Money Laundering (AML) standards/Combating of Financing of Terrorism/Obligation of banks under PMLA(Prevention of Money Laundering Act), 2002, specifically point to banks using social media as an additional form for validating customer identity even as, according to the guidelines, banks cannot use customers profile data for cross selling.
In addition, the guidelines point to the social media being used by banks for potentially identifying defaulters.
In the developed markets, the banking business is the biggest user of social media data. In 2009, the McKinsey Global Institute estimated that US banks and capital markets firms collectively had more than one exabyte (over a million gigabytes) of stored data on customers. And, according to IDC Financial Insights, the volume of digital content is expected to increase every year by 50 per cent.