Virtual Communities and Online Banking

3-Important-eLearning-Tools-to-Encourage-Community

Virtual communities are described as groups in which “people with common interests, goals, or practices interact to share information and knowledge, and engage in social interactions” (Chiu, Hsu, & Wang, 2006, p. 1873). Community of practice (CoP) is a concept pertaining to groups that are “formed by people who engage in a process of collective learning in a shared domain of human endeavor” (“Introduction to Communities”, n.d.). CoPs provide an effective lens in examining the development and exchange of knowledge in organizations.

Although there are many reasons that motivate individuals to join online communities (social, educational, etc.), the Harris Poll from Business Week found that 42% (Chiu et al., 2006, p. 1872) of virtual community members claim their involvement is professionally- related and 35% join groups for personal or social reasons. Organizations are becoming increasingly aware of the benefits associated with virtual communities: “Driven by a knowledge economy, many organizations have recognized knowledge as a valuable intangible resource that holds the key to competitive advantages” (Chiu et al., 2006, p. 1872). Consequently, the value and growth of virtual communities depends on their ability to facilitate social interaction and knowledge sharing.

Our Digital Technology

Chiu et al. (2006) integrate Social Cognitive Theory and Social Capital Theory to examine the motivational factors that affect professional virtual groups. Technological advancements in communication and information systems have had a globalizing effect on CoPs. Unlike conventional communities, CoPs lack a concrete reward system that reinforces “the mechanisms of mutual trust, interaction, and reciprocity among individuals” (Chiu, 2006, p. 1876). In their study, Chiu et al. (2006) identify outcome expectations and social capital as two main factors that impact individual motivation in professional groups: social capital and outcome expectations.

Broadly defined, outcome expectations are the predicted consequences of a given performance. Outcome expectations affect group collaboration because “individuals are more likely to engage in the behavior that they expect to result in favorable consequences” (Chiu et al., 2006). Social capital refers to “the network of social connections that exist between people, and their shared values and norms of behavior, which enable and encourage mutually advantageous social cooperation” (“Social capital,” n.d.). Social capital has a major effect on a group’s knowledge base. Chiu et al. (2006) explain that understanding the role of social capital in virtual communities can “lead to greater level of knowledge sharing in terms of quantity or quality” (p. 1884).

A U.S. bank consumer study (2015), shows that “70% of consumers across all generations (85% of millennials) believe banks that are current with the latest technology are more trustworthy.” Although consumers clearly value technology when it come to their banking, 4 out of 5 Americans claim that “when it matters most, they value people more” (“U.S. Bank,” 2015). Gareth Gaston, executive vice president of U.S. Bank explains that “people want more from their banks than apps—they want advocates.”

The study’s findings show that while many traditional practices (writing checks, physically depositing pay checks, etc.) have declined dramatically in the last decade, nearly 80% of consumers are afraid of bad customer service from banks that “go completely digital” (“U.S. Bank, 2015). Dominic Venturo, chief innovation officer at U.S. Bank, explains that “Consumers are challenging the industry to meet them where they are, and that requires a mastery of the delicate balance between convenience, security, and personalized engagement” (“U.S. Bank, 2015). This study shows that while members appreciate the ease and accessibility of banking apps, they still desire social capital—in the form of social connection and cooperation.

toon405As traditional banking practices continue to decline, do you think banks will be able to strike a balance in creating virtual communities that provide both convenience and good customer service? Or do you think consumers will learn to become more comfortable with banks that have “gone completely digital”?

 

References

Chiu, C., Hsu, M., & Wang, E. (2006). Understanding Knowledge Sharing In Virtual Communities: An Integration of Social Capital and Social Cognitive Theories. Decision Support Systems, 1872-1888.

Social-capital. (n.d.). Collins English Dictionary – Complete & Unabridged 10th Edition. Retrieved November 15, 2015, from Dictionary.com website: http://dictionary.reference.com/browse/social-capital

U.S. Bank Consumer Study Raises New Perspective on How Banks Balance Technology with a Human Touch. (2015). Retrieved November 17, 2015, from http://www.businesswire.com/news/home/20151116005811/en/U.S.-Bank-Consumer-Study-Raises-Perspective-Banks

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Social capital in crowdfunding brews small business success

One of the biggest advantages of being online that we shower praise upon social networking websites is the power to bring and connect everyone together in ways never thought imaginable.  This capability of the Internet allowing users to rapidly connect and form interpersonal and romantic relationships facilitates the accelerated growth of social capital. Putnam (2000) provides a clear picture of social capital by defining it as “…connections among individuals – social networks and the norms of reciprocity and trustworthiness that arise from them” (p. 19).  “Because human beings are largely social animals, social capital is a necessary resource” (Ji et. al, 2010, p. 1106). People want to be a part of society, they want to be a part of collective and fulfill their need for belonging, as outlined by Maslow (1952).

This is why the norms of reciprocity and trustworthiness are born from one’s social network because they want to be a part of communities where they feel involved and trusted. Chiu et al. (2006) outlines two facets of social capital: bonding and bridging. Bonding social capital refers to deeper, meaningful social connections and relationship, which is typical built between family members or close friends, while bridging social capital is typically built between groups with a heterogeneous makeup that come together for a similar cause or a commonality.  People in these groups or communities are able to pull their resources such as knowledge or maximum audience reach. Chiu et al. (2006) findings echo this tendency of online communities and the ability to encourage more pooling of their resources, so the impact and social influence of the online community can be exponentially greater. “…the facets of social capital — social interaction ties, trust, norm of reciprocity, identification, shared vision and shared language — will influence individuals’ knowledge sharing in virtual communities” (Chiu et al., 2006, p. 1872).

This leads individuals and groups involving themselves or donating money to something that is important to them and they want to help others reach their goals. As Shirky (2008) explains, the Internet and its new social tools allow groups to organize, coordinate and collaborate at little to no transaction costs unlike traditional businesses and organizations. This is why crowdfunding websites like Kickstarter and Patreon are successful because groups can quickly and easily organize and coordinate their efforts and resources due to the abundant sources for social capital. Whether it is crowdfunding’s impact on citizen journalism, which allows citizen journalists to cover in-depth local issues that the community cares about, which are not in the spotlight of traditional news organizations or the video game industry in how it subsidizes games and breaks away from the overhead control and influence from high-profile developers, crowdfunding websites have shown to allow for numerous opportunities in accruing social capital. When one is highly motivated and invested, they want to be part of the return process and see where their money is going because there are issues of accountability, and transparency in terms of what individuals see or receive as rewards not being accurate reflections of the final product, especially with the case of the Oculus Rift virtual reality headset.

Fingerman (2015) explains investors on LocalStake projects or campaigns will “either receive equity, a share of future revenues or interest on the loan in return.” Sara Hanks, CEO of CrowdCheck, says LocalStake might not attract large companies or campaigns because of the website’s promise for “…receive equity, a share of future revenues or interest on the loan in return” (Fingerman, 2015), but it is best suited for community-based businesses such as craft breweries and yoga studios.

Scotty’s Brewhouse, an Indiana- based brewery generated almost $400,000 from 120 accredited and non-accredited investors in a LocalStake campaign earlier this year after an online campaign through social media and advertisements on the brewery’s menus and bathroom stills.

Scott Wise, president and CEO of Scotty’s Brewhouse, said, “It wasn’t really just the money you’re getting in the process. For me, and for a lot of people who dip their toes in these waters, really you are creating fans” (Fingerman, 2015).

Crowdfunding campaigns can show the power, impact and value of social capital in an age where opportunities to accrue it are everywhere. It also shows how motivated users can have their voices heard because the capability of new social tools allow groups to circumvent traditional business hierarchical structures and processes in favor of a self-organizing method.

Where do you think the future trend in crowdfunding websites will be and how will social capital be the potential catalyst?