Commercial Credit in the Era of Social Business: Revolution, Evolution or "Same Old-Same Old"?
Cote, Alex, Business Credit
For all the hype--and likely because of it--social media and social networking have yet to find universal acceptance among the business crowd. Sure, the local coffee shop owner might see great value wooing loyal patrons in the door via coupons on Facebook, but does a B2B HVAC shop really need to be Tweeting in the hopes of landing new leads? Is "engagement" with your friends, fans and followers really going to get you better terms with your suppliers? And, if you're a credit pro, can you really factor in a potential customer's Foursquare "check ins" at local watering holes as part of assessing their credit risk? Probably not. But don't dismiss the business side of social networking just yet. It might just have a sane, hype-free role in the future of credit.
The Web technology of the dotcom era promised to change everything under the heading of "the old rules no longer apply," but wound up busting rather spectacularly. Soon thereafter, the true impact of the Internet, void of its earlier hype and speculation, became fully interwoven into virtually every aspect of our personal and business lives. The social web is, in many ways, following the same "hype cycle," a term coined by analyst firm Gartner to describe the adoption curve of new technologies. And while there are few credit specific applications of the social web during this over-hyped period of inflated expectations, certain developments hold promise for an evolved credit market. In fact, some look remarkably like online versions of what the credit market has been for over a century.
Credit's Technology Adoption History
Ironically, one of the reasons that credit pros were slow to adopt the original computing technology versus their finance colleagues was that computers and software, at the time, did a poor job of mimicking their relationship-based profession. For generations, credit pros made their decisions based on information gathered from localized or industry-based credit groups. They quite literally tapped into the collective knowledge of their peers as an early form of business intelligence. When this didn't scale, they formed credit information exchanges that would eventually become Dun & Bradstreet.
It was only when niche business applications began to emerge, when PCs popped up on every desktop, and when firms like Dun & Bradstreet introduced digitized collections of their data that credit pros began to evolve the way they did their job. Sure, references still mattered, but suddenly there was a wealth of actionable information at their finger tips. Data began to trump the good old-fashioned relationship, a factor that became compounded with the arrival of automated scoring and risk assessments. Clearly, the industry has realized many benefits from the availability of credit data repositories and credit policy automation that came with technological evolution, but the nagging complaint among credit professionals has been the lack of fresh information.
For credit pros, the Web augmented, rather than supplanted, their digital information systems. Search engines such as Google became a mainstay in their vetting process. While this ocean of freely available information added value, especially for research into public companies, it has yet to fully replace the specificity and depth of established credit bureaus and curated databases.
Despite the social Web's popularity in other areas of business, like marketing and sales--IDC has reported that 57% of U.S. workers use social media for business purposes at least once a week--adoption among credit professionals has largely been for purely personal pursuits.
Credit, like many other professions, has yet to find its "killer" application in social media.
From Message Boards to Social Networks to Groups
What is now commonly called Web 1. …