Harnessing Consumer Networking in Banking

Adoption of social media among the internet users has grown hugely. There are also sizeable numbers who are either willing or already following the financial institutions through social media. With over millions of users interacting and expressing their views/opinions over the social networking sites, the banking industry, particularly the consumer banking segment, would have access to information on the tastes, preferences and sentiments of consumers. For the banking industry in pursuit of newer avenues for profitability, social media could prove decisive.

Social media refers to a group of internet-based technologies that allow people to engage in interactive dialogues. Social media allows the readers/listeners to create their own content rather than just read the pre generated content delivered in traditional media. There are wide varieties of social media such as content sharing sites (e.g. You Tube, Wikipedia, Picasa), social networking sites such as Facebook and social gaming sites, etc.

Drivers for Social Media: Emergence of Web 2.0 Technologies

Web 2.0 facilitates two-way communication, rather than passive viewing by the end users of content developed by their respective owners. Web 2.0 pages allow users to interact and collaborate with each other, as creators of user-generated content in a virtual community. Examples of Web 2.0 include social networking sites, blogs, wikis, video sharing sites, hosted services, web applications, mashups and folksonomies.

Until five years ago, social networking on the web was unheard of. However, reports show that the number of users for social networking sites such asTwitter, Facebook, and LinkedIn has grown to over 100 million users in the US. Around 95% of total internet users access one of the social networking sites. Even in regions with low internet penetration, such as Asia-Pacific, 50% of total internet users access social networking sites. People use social networking sites for a variety of purpose – to stay connected with friends and acquaintances, post reviews, complaints, comments, experiences, read and review blogs, etc.

Leveraging Social Media in Finance

While many financial institutions have some presence in popular social networking sites, very few currently pursue social media as a strategy. Social media, with its large user base, could serve as a key channel for financial institutions in promoting products and reaching out to their customers. Though popular networking sites like Facebook do not allow for direct promotions, banks can make use of their presence and create a following for their products. One of the surveys indicated that nearly 80% of the financial firms surveyed (base of 38 firms around the globe) maintain some kind of a presence in one or more of the social media. This contributes significantly in enhancing brand visibility with the target audience.

Ways through which banks have promoted their brands include creating a community on popular social networking sites such as Facebook, creating a twitter feed, blogs, videos, etc. Currently, many banks have a Facebook page, through which they have created a following and a virtual community for themselves. Banks use this page to communicate with customers to highlight philanthropy, events and sponsorships and blogs on topics centred on banking activities such as saving money for future goals. As part of this communication, financial institutions occasionally provide messages that highlight their services or seek referrals.

Alhough creating brand awareness through social media is not very different from traditional marketing channels such as TV, billboards, print media, etc, the major differentiator is the existence of two-way communications. Viewers interact with each other and provide their comments and feedback. There is rapid exchange of views and opinions for any post, enhanced by the network effect of the internet. This effect has come to be known as the viral effect and marketing through social networks is known as viral marketing. This potentially enhances the reach beyond just target customers.

Engaging with customers

As highlighted earlier, one of the major differentiators of social networking is existence of conversations and relationships. Financial institutions can engage in conversations with their consumers, and understand their likes and dislikes from conversations among consumers. This provides a substantial opportunity for financial institutions to collaborate with their customers/prospects, to understand their needs and design their products. To protect fee revenues, banks have to move out of the present account based profitability model to customer based profitability model. Banks have to come out with new products as well as value-added services that consumers expect and hence would be willing to pay for it.

Product/solution development

There are various ways in which social media can be used by financial institutions to engage customers. It would be of immense value if banks could involve customer feedback and opinion during product development. Very few banks have tried to collaborate and understand consumer preferences during product development. Banks can pose questions or invite ideas from customers either through private community sites or from pages on social networking sites. These ideas can later be orchestrated and factored for new product development. One such attempt is ABN Amro Bank’s ‘The Blackboard’ initiative.

Enhancing customer experience

Banks cannot stop at initiating a conversation or listening to conversations between consumers, but have to act on such feedback to create a difference. Banks can enrich customer experience by addressing complaints/feedback that could be posted on social networking sites. They can design processes which start with monitoring these sentiments from social networking sites, involve customer care to address issues an provide final resolution to consumers. There are early adopters, such as Bank of America, which constantly monitor Twitter feeds and provide an appropriate response to these queries. Since conversations on social networking sites have a viral effect, in the best interest of protecting one’s brand image, efforts needs to be put forward to address concerns expressed in the social networking sites.

Carrying out financial transactions

One of the other ways banks can use social media is to allow customers to carry out financial transactions. There are few vendors who have tried this option, such as the ‘mymoney’ application from Fiserv. However, social media as a channel for delivering financial transactions can succeed only when banks satisfy some needs which cannot be provided through other channels such as ATMs, online banking or mobile banking. ATMs became popular due to customer needs for anytime banking, which cannot be provided by branches.

Internet banking became popular due to the convenience of conducting transactions from home. Similarly, customer preference for mobility is driving mobile banking channel. In line with the same trend, one thing that can drive social media as a means to carry out financial transactions is the need for carrying out transactions from the closest possible point. Presently, these social networks are not only accessible through PCs/laptops but also through mobile phones and tablet PCs. These new gadgets are gaining popularity by the day. The idea of facilitating transactions from the nearest point would increase adoption of the social media. For example, if a person going through their Facebook on a tablet, gets an alert about their friend’s birthday, they can immediately invoke the adjacent bank weblink and make use of the gift ideas available through a bank’s alliances with various vendors.

Technology

While many banks are still wary of using social media as a delivery channel, there are a few technology providers who provide solutions in this area.

Sentiment monitoring tools

Sentiment monitoring tools are employed to enumerate the opinions/views expressed by the customers in various networking sites. These tools are employed to read conversations taking place in various networking sites pertaining to a particular organisation or a service/product. Companies such as SAS and Cisco currently provide these monitoring tools.

Analytics

Analytics tools are required to break down conversations obtained through sentiment monitoring tools, into meaningful information. This information can provide organisations impact of conversations such as the number of followers to conversations etc. Based on these, organisations can suitably decide on a method (adequate staffing/drawing up new procedures to communicate with clients etc) for addressing the issues to reduce any negative impact or benefit from the positive impacts.

Engagement platforms

Apart from observing and reacting to customer conversations, proactively involving customers requires tools beyond sentiment monitoring and analytics. Engagement platforms provide the capability to pull in all conversations from various source sites onto single location, which employees can access and actively respond to. Such a setup can aid organisations in tracking conversations and drive it to logical conclusions. Vendors such as ‘Radiaqn6’ provide such tools.

With the help of these tools, banks can establish their own private community platform, which can also pull related feeds from various other social networking sites, thereby providing a single point of access to all conversations.

Challenges

Though millions of internet users use social networking sites to express themselves, banks still view them as untested waters. They have to analyse the changes required to their existing technology infrastructure with care. Since only limited experience and resources are available, banks are still in the assessment stages to decide on the future course of action. Banks will also face the issue of integrating this new channel with other existing channels.

While usage of social networking sites has been on the rise, there is also the issue of information sensitivity to consider. Financial services firms require utmost confidentiality of information pertaining to their customers. There are several regulations across the globe requiring the same. In this regard, consumers may not want mix their social and financial lives. This would be mean that banks have to tread very carefully with regards to privacy/security of the kind of information they get through the social media. One of the surveys indicate that around 60% of people who are not interested in accessing financial information through social sites have hacking/security concerns.

One other challenge banks will potentially face is that of regulatory concerns. While banks are already faced with increased regulations due to regulators seeking to protect the financial system, the regulations for social media would add to the burden. While the UK and US have some regulations pertaining to the social media, no other country has anything specific on social media. This would mean that regulations would evolve over a period of time. Hence, banks have to carefully consider how any new regulations would have an impact on the investments made in this direction.

Conclusion

In light of current trends, whereby banks are forced to come out with new/ more value-added products/services to improve profitability, banks have to depend on techniques such as behaviour-based segmentation and customer feedback. All of these require good understanding of customer preferences and behaviour. Social media, with its wealth of information on customer behaviour, could become the cornerstone in banks’ customer relationship strategy.

While social media presents vast potential in terms of customer relationship management (CRM), social media as a medium for carrying out financial transactions is still treated with caution. This can be seen from customers’ low level of interest on the likelihood of carrying out these transactions through social media. The causes can be attributed to reasons such as information security/hacking etc and lack of awareness created among customers. However, it needs to be remembered that all existing channels also faced similar kind of resistance from customers when they were introduced. The popularity of social media as a means to carry out financial transactions will be determined by the differentiation it provides in relation to existing channels. One apparent differentiation it could provide is that social media can make the financial transactions available at the closest possible point. This could prove beneficial, particularly with the growing popularity of variety of mobile gadgets.

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