Community Service with the Personal Touch

September 23, 2014
/   Insights

Question: Community branch, personal service, mobile banking—which is the odd one out? Answer: None. Otherwise, the industry is in trouble. For some time now, there have been discussions about the future of community banks...

Cause and Effect: If you build it, will they come?

July 23, 2014
/   Spotlight

Many financial institutions assume that digital banking is lucrative because the most valuable customers happen to bank online. While there is certainly a correlation between online bankers and higher profitability, quantitative evidence suggests that...

Fast Facts: Student Loans

January 22, 2013
/   Insights

The Financial Services Roundtable recently released another iteration of its Fast Facts, reliable, bullet-point research about issues facing the financial services industry. Topics span TARP, Dodd-Frank, insurance, lending, retirement savings and more.  Below are some updated Fast...

Intuit 2020 Report: The Future of Financial Services

April 11, 2011
/   Insights

Today, Intuit released the latest edition of the Intuit 2020 report, Intuit 2020 Report: The Future of Financial Services, which identifies and examines four key trend areas that will  transform the financial services industry...

Small Business: Perception vs. Reality

November 21, 2012
/   Insights

In the most recent election cycle, like most others before it, the one sector of the economy that got the most attention was small business.  This is the future, we were told by every...

The Top 10 Trends in the Digital Banking Industry

December 18, 2013
/   Spotlight

2014 is rapidly approaching and as the year wraps, the Digital Insight team has pulled together the top 10 trends in the digital banking industry based on data and trends from studying financial institutions....

Mobile Banking Engagement: Data from Digital Insight

June 24, 2013
/   Spotlight

Intuit Financial Services has been conducting a comprehensive and ongoing study of financial institution customers. From these studies, the company has been able to provide a deeper view of banking customer behavior across several...

Fast Facts: Financial Executive Economic Outlook Report

February 1, 2013
/   Insights

The Financial Services Roundtable recently released another iteration of it’s Fast Facts, reliable, bullet-point research about issues facing the financial services industry. This series is the The Financial Services Roundtable’s first bi-annual Financial Executive Economic Outlook...

How many friends do you have? Are they really friends? And does that same standard apply to your Facebook friends? Think hard, because your answers to those questions could spell the difference between you getting a loan, and not getting a loan.

It was bound to happen eventually. We all know how our use of social media leads to the creation of mountains of data about each of us. Marketers look at all that data to decide which commercial messages are most appropriate. Political campaigns analyze meta tags from Tweets to decide whether we’re swing voters, and which ads we should get. And now, we’re beginning to learn how bankers are combing through Facebook relationships to help gauge creditworthiness. On a related front, a growing number of tech startups is coming up with tools and methodologies to meet this need.

Let’s back up a second. How did we get from FICO to Facebook? What exactly do social networks have to do with loan applications?

Quite a lot, it turns out. The belief is that we typically connect with like-minded people, good or bad. In ye olden days, that meant asking for references from friends and family. Now, technology plays that role. Hence, if you have Facebook friends who defaulted on their loans, and if you interact with them on a regular basis, you might be the type to default too.

The companies offering these services see their mission in a more positive light. Lenddo, for example, says it helps the emerging middle class use social connections to build their creditworthiness and access financial services. However, could the same information be used to block a loan?

It was only a few years before Mark Zuckerberg dreamed up the almighty Facebook that British anthropologist Robin Dunbar developed what we know as Dunbar’s Number. Using research conducted on primates and building on the size of the average human brain, the theory suggests that there is a cognitive limit to the number of people with whom any individual can maintain social relationships. Dunbar posited that the number is about 150.

Random as it sounds, the figure comes up at numerous points throughout history. From Roman military history on down, the smallest autonomous military unit, the company, has typically been capped at 150 soldiers. Neolithic farming villages peaked at 150 members. Hutterite communities historically split when they reached 150.

For the record, Dunbar’s influence is now being recognized throughout the tech world. The Facebook crowd knows him well, and other firms are using his ideas to fuel their product development for the social media world. It’s why the messaging and photo-sharing service Path specifically limits users to 150 friends.

So maybe it’s a question we need to ask ourselves: Are all those Facebook friends really friends? At best, they might devalue the term; at worst, they could hurt our credit rating.

It’s not only Facebook, of course—as adherents of Big Data know, virtually every kind of online activity generates data points that contributes to the algorithm that computes the eventual credit score. What did you buy off eBay? What kinds of things do you get from Amazon? How active are you on PayPal? Who do you follow on Twitter?

To be sure, the genie is not going back in the bottle. Any given service we use regularly now might fall off our radar tomorrow (think MySpace), but the basic premise of social networking, and the behavioral changes the practice has induced, are here to stay. It’s unfortunate that a random re-Tweet or Facebook post can have such severe consequences. It’s also the reality.

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James W. Gabberty

Gabberty is a professor of information systems at Pace University in New York City. An alumnus of the Massachusetts Institute of Technology and New York University Polytechnic Institute, he has served as an expert witness in telecommunication and information security at the federal and state levels and holds numerous certifications from SANS & ISACA.

Marisa Mann

Marisa Mann brings over 15 years of experience in consulting and financial services industries to the Solstice team, working on large scale enterprise initiatives across many technologies, including specializing in the digital space – Internet and mobile. Mann is passionate about mobile and the endless possibilities for the enterprise, delivering business value through strong brand recognition and driving to excellence in the consumer experience. Prior to Solstice, Mann worked at JP Morgan Chase, Diamond Management and Technology Consultants, Washington Mutual, Inc, and Accenture.

Zachary Ehrlich

25-year-old writer, and as a native San Franciscan, I am unreasonably loyal to Bank of America, if only for their superhero-like origin story, involving the 1906 earthquake and Italian fruit vendors.

Brad Strothkamp

http://www.forrester.com/rb/analyst/brad_strothkamp