Lothar Lochmaier is closely involved in the future of the banking industry. Privately he runs the web blog Social Banking 2.0 – Der Kunde übernimmt die Regie (Social Banking 2.0 – The customer takes to the helm). He is also always on the move as a freelance economic correspondent. We are happy that he has taken the time to answer a few questions for us.
Janina Benz: In your web blog, you take a critical look at current finance and banking topics. I’d be interested to know how you found your way into the blogosphere.
Lothar Lochmaier: First, I am curious as a person in general, but also I’m a freelance journalist, so I actively seek new types of communication to try out. Second, I was working on the first book in a banking trilogy called ‘Die Bank sind wir’ (‘We’re the bank’), and a sort of internet diary was a helpful complement to it. And third, I think the future lies in networks where you can exchange views with other people interested in certain areas of specialisation, something that can really enrich your own work. So I just spontaneously got going one day and have never regretted it, even though it took a lot of discipline and dedication to keep tackling new topics.
JB: The banking sector can be quite conservative. Did you have to deal with much criticism at the beginning?
LL: You always have to be prepared for criticism, even on a personal level – from any direction. You’re always in danger of being either too radical for some people or too conservative for others. In some cases, as with my coverage of Noa Bank, which completely polarised the readers of my blog, you find yourself ducking flak from both directions. Other than that, though, I can’t complain. The positive networking effects considerably outweigh the negatives. Even the so-called conservative banking sector is learning to take this type of blogging format seriously, even if change is sometimes like squeezing blood out of a stone.
JB: What exactly does Social Banking mean for you? How do you define it?
LL: I see two basic models, which to a certain extent overlap, but there are also some major differences. The classic description is as a sustainable, social, ecological investment with relatively strict criteria for what is allowed and what isn’t. The second form is Social Banking 2.0, which brings the users to the forefront. So it’s a network-based business model. This form is certainly also sustainable in some ways, but partially pretty far away from its origins. You could also put it more controversially and say that sometimes the web 2.0 protagonists lack a clear – or expressed another way – ethical direction. That’s why Social Banking 2.0 gives users, i.e. bank customers, more room to voice their concerns, something not all sustainable banks can really offer. Some of the ‘ecological’ banks do without social media altogether. But there are also many similarities between the classic 1.0 and 2.0 versions.
JB: Well the technology’s certainly in place. What, in your opinion, is holding the banks back so much from introducing new bank services?
LL: The old way of doing business is based on commission-based products. It won’t be until they’re willing to make compromises and the banks move more towards customers by offering fair services, products and pricing that it will make sense to get involved in the supposed next generation of banking services. The problem is, as we see in Greece, it’s impossible to turn the entire government upside down overnight. The structures are too deeply rooted for that. But serious change will need to come, and there’s consensus that anything else would be mere window dressing – which is why the majority of the representatives there adhere to the old proverb: speech is silver, silence is golden. You don’t get brownie points by offering flashy mobile devices and snazzy apps, at least not with mature investors. You can’t change customer attitudes just by dazzling them with technology.
JB: Trust in the banks has been shattered. Can that be corrected by adding transparency and interactive elements, or do you see this as a more long-term loss of confidence?
LL: It’s difficult to say what the future holds. Among younger customers, under 35 or 40, it looks like the loss of confidence has already been tremendous. I doubt whether that can be repaired that easily. The younger members of society will have to create their own infrastructure and challenge the older generation more. I personally don’t think it’s that bad. It’s one of those social and economic innovation processes you need sometimes. You can’t win trust back with transparency alone, but no one in the banking industry believes that anyway, as it functions better than other markets simply by hold its cards close to its chest. The only medicine that would really help would be a severe, almost paralysing dose of transparency – go beyond product information pamphlets and formal consultation groups and let customers take to the controls.
JB: Crowdfunding is also benefiting from this new direction – especially with start-ups. The new funding option’s booming. To what extent do you see a risk or financial loss for banks here. Could a whole area of business disappear?
LL: You can look at it from another angle: every bank that hasn’t yet incorporated external functionalities – along the lines of crowdfunding – into its own IT system within the next two to four years will be seen as behind the times. Of course that’ll need a new management culture within banks, and that will require a little more time. Imagine a bank executive not being able to hold down his job in five years because he can’t get his mind round the ins and outs of social media and how to actively integrate customers into the supply chain. In those terms, you could rephrase the answer: if you don’t react early enough, you’ll be swept away by the tide of time.
Of course for the new players, banks hesitating is like a healthy layer of peat they can keep flourishing on. Banks are under threat in the medium to long term from some pretty nasty cuts, especially when it comes to financing small and medium-sized businesses, and especially if they continue to dismiss Web 2.0 or even completely prohibit it. It’s like being trapped by some kind of mental firewall. Then it will come through social media, actually through the back door, straight into the company network and edge upwards, even more forcefully.
JB: Thank you Mr Lochmaier, not just for the interview but also your detailed answers.