Many banks have realized the potential of online social engagement; however, most of them are reluctant to connect with customers online. The concept of virtual online websites is not getting any younger. The realm of social media or online social engagement is growing with an estimated value of US 10 million in 2010 as estimated by Engage Digital Media.
In 2009 Mashable had reported that a user of Entropia Universe – an online virtual engagement website – bought a virtual space station for US $ 330,000. This transaction is registered in the Guinness book of world records as the most expensive virtual world.
People have got used to making online payments for goods on Internet and conducting their daily transactions via electronic channels. The comfort level now extends to social networking sites, where users are paying for virtual goods, and this builds a case for introducing financial services.
The scope of innovation in the world of online payment market is extensive. Once extended to virtual online world the scope is challenging. Some of the existing websites in the online social engagement world that facilitate financial transactions are: -
- Facebook, Secondlife, Entropia Universe – Purchase of Virtual goods
- Purchase of Online Services – Facebook - Qtel Mobile Top up
- Online Social Lending – Virgin Money, Kiva
The above examples are an insight to various business opportunities that are yet to materialize.
Mind Ark, the company which runs the Entropaia Universe became the first company to issue virtual banking licenses to real world banks in 2007. In March 2009, the Swedish Financial Authority, granted license to Mind Bank AB, that will allow it to function as a central bank for all the virtual world’s within Entropia Universe. Mind Bank will be able to process real money transactions for activities in the virtual world.
During my research, I came across an application on Facebook that allows users to perform financial transactions - Fiserv's MyMoney, a US based app, which is now only available to credit unions, and may be offered to banks in the near future. Facebook users download the application, which helps them to find and join a credit union, view account history, balances, and make transfers.
Banks are experimenting with this space but are yet to come out with a firm working model. Expecting a ROI on spend is not the way forward, as Social Media is still in its infancy stage.