Defining and relating reputation, whuffie, attention, social capital and privacy

Reputation

I define having reputation as having reputable third parties willing to confirm one’s claims as true.

These claims include:

  • personal information such as one’s date of birth or first name, 
  • transaction information such as timely re-payment of debt following a credit card purchase, 
  • opinions expressed that are shared by others such as a blog post or 
  • actions done or not that are approved by others
  • artifacts produced that are appreciated by others

Whuffie 

Verifying someone’s claims used to be expensive and limited to a few players, such as credit bureaus in partnership with credit card networks. The recent computerization of communications has reduced the authentication cost by increasing the amount of authenticatable information (in the form of published opinion/thought pieces) and the potential number of authenticating parties, leading to my understanding of the concept of whuffie. 

Linking with attention 

I say “potential” because 3rd parties will not authenticate content unless one has their attention in the first place. Attention is limited the nature of people’s cognitive capabilities and is ideally dependent on their goals, but also a function of one’s reputation, which leads us to…

Social capital 

The self-reinforcing aspect of reputation together with each person’s limited attention and exploding amount of authenticable information is what explains social capitalism: the authenticable information created by some is republished by others and through this process fully/partly appropriated because of their reputation. This is similar to Marx’ capital where part of the value-add of workers’ labour is appropriated by employers because of their ownership of the productive asset.

Examples include bloggers or journalists who are given exclusive information before it is published because of their established trademark. They don’t need anymore to find a good story, only to filter it out from what they receive.

Attention is the new capitalistic asset to own, maybe the new money considering that people’s attention is limited and that it is dispensable by those with social capital.

(Side note: assuming attention is driven by goals (see Flow), owning attention is done by getting others to align their goals on one’s goals).

Privacy 

What is interesting about reputation is that it does not necessarily require information to be published. It only requires someone reputable to confirm it as true. I don’t need to tell you that I’m over 21 years old, but just need to point you to someone reputable that can confirm my claim.

In other words, privacy may not be dead, but it has to be dead with one or a few highly reputable parties.

The relation to OpenId and OAuth

It derives from the above that an OpenId or OAuth provider’s relevancy is proportional to its reputation. Its value is proportional to its ability to actually verify the information it hosts.

The future of the BofA iPhone app: besides better iPhone support, personalization?

I recently went through the 350 or so reviews of the BofA iPhone app. Here are my conclusions.

First of all, BofA should have called this app “ATM locator” instead of “Mobile Banking”, as the ATM locator capability is praised by most as a way to save on fees when traveling out-of-town or when in unfamiliar neighborhood, but the overwhelming majority comment on the fact that the application provides a very poor mobile banking experience on the iPhone.

What is meant by iPhone-specific experience?

iPhone-specific experience is the single most requested feature. I’m careful not to talk about implementation details here (native app versus iPhone-optimized Web app) as I still don’t have a strong opinion about which approach would ultimately bring the best user experience (native app developed in-house would require a learning curve that would certainly impact the quality of the app, while a Web app would have to be provided with JavaScript API wrappers of some of the SDK APIs like CoreLocation to provide an interesting user experience).

For most what iPhone-specific experience means is:

  • More finger-friendly (avoid pinching, which is a sign that the app is not optimized for the iPhone)
  • iPhone-specific styling like buttons instead of tiny text-based links
  • Consistency across the whole app (not a mix of a native for ATM locator and Web for mobile banking that does not instill confidence)
  • More condensed information per page using table views

Other interesting requested features

Here are the other interesting features requested:

  • Add support for customers in Washington and Idaho states.
  • Faster login (one suggested using a PIN instead of a long password)
  • Transaction reconciliation via mobile banking
  • Background download of information such as balance for quick one-click look
  • Better support for credit card accounts (currenly only balance is available, not transaction list)
  • Support for My Portfolio feature
  • “Something like E-Trade on the BlackBerry”.

Further thoughts: personalizing the mobile banking experience

The one thought that came out of this analysis was that mobile users have fundamentally different needs in terms of the information they want to see after clicking the BofA logo on the iPhone homescreen.While most expect to be able to do everything they can do with online banking, all expect to do much faster the things they do most commonly in online banking. And that’s where the design problem of shrinking online banking into a mobile app is in my opinion. On one hand, what everyone does most commonly is very different from customer to customer. On the other hand, an intuitive interface design principle is “Human interface cognitive load is proportional to the number of clicks/keystrokes/gestures“, which means that people won’t like the user experience unless they get to do what they want to do in the least number of clicks and keystrokes. This includes login in, selecting a transaction, entering amounts, etc.

To give a few examples from the reviews: those who travel don’t care about the ATM locator. Those who travel love it. Some only have a Credit Card account with Bofand don’t care about Checking/Savings.

Which leads me to think that the future of the BofA iPhone app or any mobile banking app for that matter will be in the ability for the user to personalize their experience by providing to BofA the shortcuts to the transactions they do most.

This may include just a transaction identifier and an account identifier (ex. “view balance” “checking-1234″) or more complex shortcuts that borders on programming/querying: for instance “view transactions” “CC-8456″ “Last 10 posted transaction” or “transfer” “$100″ “to John”.

Online banking will most likely be the place where these personalizations will be programmed. Until then, getting that 5 star rating on iTunes app store and getting everyone happy might be difficult.

Banking-related panel proposals for 2009 SXSW Interactive Festival

I searched the SXSW interactive panel picker for “banking”, “money”, “finance”, “financial”, etc. Here are the panels I found:

  • Banking 2.0 – Algorithmically Fixing the Sub-Prime Mess (suggested by Christopher Hughes, PennyMac): Sub-prime debt may be causing the collapse of the worldwide economy. Speculators, investors, banks, mortgage brokers, honest home-owners have all been duped into believing that that the real estate market was a “sure thing”. Can a solution be found with a computing cluster, open source software, and a semi-complex algorithm? Yes.
  • Future of Money: Life after the Fed (suggested by Blake Stephenson, Flow): Ron Paul’s presidential campaign shone a light on the impossibility of central banks to “regulate” the economy and the inherent problems with fiat money (paper money). The internet is playing and will continue to play a critical role in the creation of the future of money. What is the future of money?
  • Mobile Ubiquitous Banking and the Future of Money (suggested by Kyle Outlaw, Avenue A | Razorfish): Nearly half the world’s population now has a mobile device and more than a thousand cell phones are being activated every minute. The ubiquity of mobile devices will make new services available to billions of people worldwide who have not had access to traditional banks or credit cards. In developing countries such as Kenya – where nearly 80% of the population is excluded from the formal financial sector – text messaging is being used to transfer money to friends and family living in other countries. Moreover, new forms of currency are being created – trading cell phone minutes for goods and services, for example. This panel will explore the challenges and opportunities as banks go mobile, and how the revolution in mobile financial services will change the way we think about money.
  • Strategies for Establishing Social Media in B2B Relationships (Brad Garland, The Garland Group | Banktastic.com) Social media in the consumer space is clearly talked about and prevalent. What is barely getting addressed is how these technologies can be implement in the business world and what are ways to do it successfully. This panel will explore that concept and how B2B relationships can be formed using these tools.

About SXSW:

SXSW Interactive Festival features five days of exciting panel content and amazing parties. Attracting digital creatives as well as visionary technology entrepreneurs, the event celebrates the best minds and the brightest personalities of emerging technology. Whether you are a hard-core geek, a dedicated content creator, a new media entrepreneur, or just someone who likes being around an extremely creative community, SXSW Interactive is for you!

iPhone Barcode reader now integrated with Safari/Dialer/Mail

Stefan Hafeneger has released the latest version of the Barcode application, and it is now available at the App Store.

The decoding now supports both DataMatrix and  QR code format, but more importantly it supports the extraction of the data for use with Safari (encoded data has to be a URL), Mail (encoded data has to be an email address) and Dialer (encoded data has to be a phone number). Here is a free online DataMatrix barcode generator to try for yourself.

The decoding actually does not seem to work as well as it did in the earlier version, but think of the possibilities opened by the ability to send to a barcode, open a barcode in Safari or dial a barcode…

A bank’s payment strategy in 3 words: Convenience, Convenience, Convenience

The Bankwatch had an interesting post titled Payments – the impossible dream for Banks? this week outlining the importance of payments for banks and the challenges they face in bringing about innovative and user-friendly payment solutions. Colin’s line of thought is that:

  1. Banking has moved to self service
  2. Self-service allows two types of financial activity … view balances, or move money.
  3. Moving money is payments.
  4. Payments, as currently offered by banks, are mostly hell and they cry out for innovation
  5. Payments innovation is not about technology or standards (SEPA), but about customer experience

I cannot but connect this “hell” experience with one of the most interesting questions raised during the Mobile Web Wars conference last week:

Why  people are willing to pay for apps on the iPhone, but not on Facebook?
Why people are willing to pay $3 for ringtones, but not $1 for music files?

A participant was arguing that the reason was the “mobile effect” i.e. the fact the mobile is a relatively new communications channel that is so personal that people value it more than the PC channel. But at the same time, Bart Decrem, CEO of Tapulous, a social app company for the iPhone, was saying in the background: “Ease-of-use, Ease-of-use, Ease-of-use”, in other words: convenience drives customer value and their willingness to pay.

Something pretty obvious some would say, but this idea was made to me much clearer in the last few days while trying out two new services: expensure.com, a London-based bill sharing online application, and TipJoy, an online tipping (“micropayment”) service. Both services address different user problems, but they both address it very well with an extreme focus on convenience.

TipJoy for instance, does not require what you would normally call “payees” to register: you can simply donate to any URL on the Web you want. As Web site owners register and add the TipJoy button on their Web site, they essentially claim by the same token URLs and collect tips. From the payer / tipper perspective, a single click on the TipJob button is required, nothing more: the button is already configured by the payee with a pre-defined amount (in the order of 5 to 50 cents). This is convenience at its best.

Expensure solves the problem traditionally solved by complex spreadsheet. I used it to share bills between an upcoming WE trip with my friends and I was extremely satisfied with the application. It’s all in the details. For instance, I was able to set a ledger and experiment adding expenses to it without having to invite my friends to the service, something that would have refrained me from starting to use it, b/c my friends are too busy to receive unwanted invites from applications I found not worth using after a trial. In this case, I did, and ultimately send the invite to 5 friends.

Both applications touch on the problem of payments, but with an extreme focus on a relatively highly context-specific problem and a very well designed solution to the problem. Yes, I could have used my bank’s transfer service, or checks, plus a shared Google Spreadsheet, as I did in the past, but I will certainly not do so now that my social network is almost set up with Expensure. Same thing with TipJoy: while I could have used a PayPal button on my blog, I can see the value of simply providing a pre-defined amount to users willing to tip me, and will most likely go with them in the end if I ever want to be tipped for writing these articles (I’m not really and I’m doing this on the side of my day job).

What was the most interesting to me, what the following FAQ excerpt from Expensure:

Can I pay somebody back using Expensure? Soon. Right now we are focusing on making Expensure the best shared expense tracking app out there.

and from TipJoy:

Why can’t I withdraw cash from my Tipjoy account? There are legal implications to allowing this transaction which we are currently working through. We expect that you will be able to withdraw cash very soon. In the meantime, if you have a minimum of $5 in your account after removal of applicable fees, then you can do the following with your earnings: 1. Donate to any official charity you’d like 2. Purchase an Amazon gift

Both of these companies are clearly focused on providing the best customer experience first, then only will they figure a way to monetize it. They probably have listened very well to this presentation from Paul Graham on how being benevolent and focusing on solving problems is more important than thinking about making money when starting a business.

The only thing that these companies are missing is that they are not a bank or Credit Union, but as good entrepreneurs, starting a new CU or bank is probably not an option they will choose. Just like PayPal partnered with Wells Fargo, I would not be surprised to see an innovative bank or CU partnering with them to handle the back-end aspect of their solution, in particular legal compliance in each legal framework/geography they do business in.

So, when real-estate agents are asked about RE investments strategy, it’s: “Location, Location, Location”. When asked about early-stage investments, VCs talk about “People, People, People”. Perhaps, when banks are asked about their payment strategy, or their general banking strategy for that matter, bank should say: “Convenience, Convenience, Convenience”.

Financial services pay the most for prospective customers’ attention

I was encouraged this WE to look into the cost-per-click of some financial services keywords in the U.S. using Google Adwords Keyword Tool.

As of the time of this writing:

  • “video cameras” costs you an estimated $3.14 per click,
  • “buy car” costs you $4.81,
  • “wireless” and related: ~$5.00,
  • “dsl” and related: ~$6.00
  • “real estate investments”: $5.47
  • “buy computer”: ~$8.

Now get this:

  • “buying mutual funds”: $12.66, “online stock trading: $18.06
  •  “best credit card deals”: $25.94, “balance transfer credit cards”, $18.23
  • “auto insurance quotes”: $34.58, “insurance quotes: “$29.77″
  • “high yield checking account”: $17.81, “checking account rates”: $20.44
  • “mortgage refinancing”: $32.58, “home equity loans: $23.74

I know this is a very superficial research study, but there seems to be a pattern here: financial services firms are paying significantly higher than firms from consumer sectors for prospective customers’ attention.

What can we learn from it? IMO the cost per click is a function of

  • profitability of the related service offered over the average customer relationship duration, and
  • likelihood that the prospective customer who has clicked will subsequently actually buy the service online,

then my quick conclusion is that there is probably good business opportunities in online comparison services for financial services products, as well as in new financial services that leverage the Web and social networks to be cheaper and mass-market. Peer to peer lending is probably one of them.

Developers: register your API key and start your own credit union/bank

Imagine if a bank or CU was exposing their system via a GData-like API, and was outsourcing innovation to third-parties, possibly creating a dedicated VC fund or prize to finance startups building applications on their API, managing innovation as a good old option portfolio, possibly acquiring only the most successful and profitable of these innovators.

Well, that’s not really possible yet, but it seems the idea is in the air, at least the API part. Here are some excerpt from the comments section of OpenSourceCU report on BarCampBankDallas. Here is a summary:

In the current economic context, some credit unions may be pushed to innovate to survive, and one effective tool would be to expose their API. Tim McAlpine says:

As far as the API goes, traditional FIs are the opposite of open source. Being open requires a start-up mentality. Unfortunately today’s old dogs are more interested in keeping the vault full and closed. […]

This API opportunity lies with the credit unions. If an open CU was backed into a corner to survive, they may think differently if we could get them to understand the concept and potential power of an API. This type of CU may be ripe for innovation and may just turn that API over. If they did, I bet the geek world would love to slide in the door and innovate on their behalf!

In a subsequent comment, Robbie Wright took this vision to the next level: what if someone was providing a platform for anyone to start their own financial institution, leaving the difficult paperwork part to the platform provider:

I believe a large opportunity exists in helping people start new CU’s. It is so tough from a regulatory perspective and from a capital perspective, that it always seems starting a CU is impossible. That is what we need to change. Aside from the open source core processor idea that has been kicked around for a while now, there exists the possibility to create an entirely new industry of the outsourced FI.

Now, what would this API would look like?

BarCampBankDallas, Whuffie and open Banking Web APIs

I wasn’t able to attend BankCampBankDallas, but Charlie over at Open Source CU wrote a nice report highlighting some of the concepts that were discussed during the camp:

  • Incorporating online reputation into financial reputation: “why can’t [FIs] hook into LinkedIn and view a person’s Recommendations and process that into their credit score”
  • Opening a FI’s APIs to the creativity of their customers and 3rd party developers: “could there ever be a day where an existing financial institution could let people hook into it and meaningfully tailor the infrastructure and product to their own needs?”

I think exploring the links between online reputation and financial reputation is very interesting indeed. I think leveraging public social data is a great way for banks to reduce the risk of payment default on people with less than perfect credit. I’ve talked about this before, particularly in the context of peer-to-peer lending: in the problem with banking innovation…, I explained how a loan where some of the people lending money are family members offers a different and more attractive risk profile than someone’s lending money from people they don’t know (and don’t care) about (especially when you have a huge securitization food chain). I had never thought that such data could eventually actually be part of the FICO score, and that I think that will take A LOT of time. Here is my guess at how things will evolve: I think that Experian-like services computing someone’s overall reputation (see how to compute someone’s whuffie) will develop, and as they become established brands, may end up as an input to FICO scores. Anyway, I do think FIs are fundamentally social intermediaries and can’t afford to ignore the publicly available social data. I think there is a great opportunity, especially at credit intermediaries whose goal is the benefit of the community (credit unions), to re-socialize credit relationships.

Regarding the opening of Banking Web APIs, I think also that this is a great way for FIs to smartsource innovation while ensuring the highest level of security standards. In the problem with banking innovation…, I suggested at the very end that one way to smartsource innovation could be to “do what Apple or Facebook do: expose some of this information via easy-to-use APIs in a way that is more secure than their startup competitors. Then, allocate a VC fund to fund startups using this API (which is equivalent to buy an option to invest more/buy out the most promising ventures later).”

So, I’m glad to see that these highlighted concepts are inline with some of my own ideas and probably with many other people. I really hope I can make it to the next BarCampBank near San Francisco.