What Message Is Facebook Sending to Banks with Messenger Play?

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A second major U.S. bank is allowing customers to contact it using Facebook's Messenger app, a move that will likely improve satisfaction in the short term but underscores big-picture existential worries faced by the banking industry.

TD Bank Group is set to announce Thursday that customers of its TD Bank unit in the U.S. will be able to get live support via Facebook Messenger. The Toronto-based company rolled out the live chat, which is available every day from 6 a.m. to 11 p.m. Eastern time, to its Canadian user base in December.

Unlike what Facebook announced on Tuesday with partners from various industries including Bank of America, TD's service is staffed by people, rather than supported by artificial intelligence "bots." Nonetheless, the goal is the same — to be where the bank's customers are.

"Given the vast popularity of Messenger, we believe this initiative will make contacting us for support even faster and easier — enabling us to deliver an unsurpassed customer experience," said Michael Rhodes, head of consumer banking at TD Bank.

More banks are likely to add the service, or at least they should consider it, observers say.

If successful, the partnerships could give banks another way to interact with their customers on one of the busiest platforms in the world. By pairing with one of the most downloaded apps, banks would likely gain prominence on their users' phones, which is becoming at least as important as being "top of wallet." The AI component could eventually give banks a way to upgrade their mobile experience from one built on quick tasks — like paying a bill or checking the balance — to the kinds of advisory services they aim to provide in person.

In other words, this is a game changer. And down the line, it could lead to a more active role for tech giants like Facebook in the realm of financial services.

Immediate Opportunities

Using Facebook Messenger for communications is part of a broader push by banks to be more customer-oriented. That's the root of omnichannel banking — letting customers pick how they want to interact with the bank, rather than limiting their options.

With its 900 million users, Facebook is a natural avenue for such communication. If people are already there, why not use that platform?

Indeed, Bank of America cited the social network's omnipresence as part of its motivation in announcing that it would work with Messenger.

"We want to serve clients wherever and whenever they choose, and Messenger is a perfect complement to our connected banking proposition through 2016 and beyond," said Michelle Moore, head of digital banking at B of A, in a press release Tuesday.

The company already allowed users to directly connect with a customer service representative by tapping a button on the mobile app. It also has a chat function on its website. B of A sees Messenger as a supplement to those services, not a replacement, a spokeswoman said.

Also, as people increasingly see Messenger as a valid method of communication, some banks will likely want to adopt it quickly to remain relevant, said Julie Conroy, a research director at Aite Group.

"You don't want to be the bank that can't interact with millennials, for example, in the way that they want to," she said.

In the mobile phone realm, the ability to latch on to one of the most downloaded apps in the world is compelling.

"Most phones are loaded with apps, but consumers only use four or five, Facebook usually being one of those," Conroy said. "If this bot idea does take off, and it starts being used for business-to-consumer transactions, then your brand has to be capable of interacting on this platform."

In addition to connecting with customers on the channel, the partnerships with Facebook could help banks gain prominence in notifications on the home screen of a mobile phone, said Mark Schwanhausser, director of omnichannel financial services at Javelin Strategy & Research.

"The value of the real estate in notifications is on par with finding an apartment in San Francisco," Schwanhausser said.

Down the Road

Most companies that will be using Facebook Messenger will rely on chat bots, essentially artificial intelligence software that can answer questions, on the platform.

Right now, such technology has mixed reviews. It can range from gimmicky (asking Siri on the iPhone if the character Jon Snow on "Game of Thrones" is dead) to disastrous (see Twitter's Tay fiasco) to marginally useful.

That will change, observers say.

"Years from now, we will look back on 2016 and remember how clunky [automated services] were, but see them as a real part of our lives," Schwanhausser said. "No one is backing off from trying to make this happen."

For now, companies will likely use the Messenger chat bots for simple tasks. Security concerns could keep things that way.

B of A, for instance, said its initial capabilities would likely center on important real-time alerts.

Conroy said banks that do use this platform will have to have the proper risk protocols in place. Since they are essentially trusting Messenger to authenticate the person the bank is interacting with, she said, banks will have to decide how services are delivered.

"If someone just wants to do a balance check, you might trust Messenger to authenticate them; if they want to transfer money, a bank will likely take additional [security] steps on the back end," she said. "One thing we are seeing is fraudsters are escalating attacks on the contact center. This is one very attractive attack vector to do that."

But as artificial intelligence improves and institutions and users become more comfortable with the service, the bots could potentially handle more tasks and give banks the opportunity to provide advisory services digitally, observers say.

"We could see it migrating toward more complex financial decisions. Imagine it going from understanding 'I'd like to save more' to 'Can you help me find ways to get closer to my savings goal?'" said Bradley Leimer, head of fintech strategy for Santander U.S. Innovation.

Leimer declined to comment on Santander's plans with Facebook Messenger, but AI is clearly something the global bank is looking at. The bank announced late last month that it was rolling out voice technology to it U.K. customers, allowing them to ask the mobile app questions like "Where did I spend the most money this month?"

The Big Picture

If banks were already concerned about getting replaced or reduced to plumbing by Facebook or its tech giant brethren, Facebook's play with Messenger and businesses should only heighten those concerns.

"Players like Google and Facebook are trying hard to engrain themselves into the center of your life through virtual assistance," Schwanhausser said.

So, should Facebook Messenger's play for business-to-consumer communication take off and people become comfortable discussing their finances via Facebook, could the banks be cut out of the equation? Maybe, observers say.

Of course, there is the issue of regulation — that's likely to keep some tech companies from going fully into the banking business, given their global business models.

Another factor in banks' favor is that people trust them, even though they see them as tech laggards, Schwanhausser said. Meanwhile, tech companies are increasingly gaining trust of consumers.

"Big tech companies are moving up — they are gaining confidence from consumers," Schwanhausser said. "Banks risk losing the game if they are not careful."

Fintech startups focused on messaging, not surprisingly, say that banks ought to see Facebook's move as underlining the importance of chat, but should be wary of a situation where they don't have control over the system.

"It's clear from Facebook's announcement yesterday that messaging must be one of your top mobile features for consideration in 2016," said Shannph Wong, vice president of engineering at Magnet Systems. "Define your messaging strategy now, or it will be defined for you."

But should Facebook see Messenger as a way into the banking industry, observers say there is still an opportunity for banks. In fact, it could be an extension of a hypothetical model in which banks increasingly look like app stores, holding customers' deposits but connecting with other players for virtually everything else via application program interfaces. (APIs work like Lego blocks, allowing software developers to easily bolt their apps onto existing services.)

Some banks are afraid of being relegated to "dumb pipes" in such a scenario, but Leimer said they shouldn't be so quick to dismiss that fate.

"When you're the plumbing, the plumber still gets paid," Leimer said. "The 'dumb pipes' fear factor is relevant, but there is still quite a lot of potentially good business in that."

Bryan Yurcan contributed to this article.

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