2020 Foresight: Retail Banking and Social Media – Do the Ends Justify the Expense?
In the altered environment following the economic downturn, financial services are seeking a new operating model based on attaining a primary relationship with the customer through the rebuilding of trust and forging active customer relationships.
Social media presents a valuable opportunity for retail banks. As internet access and smartphone adoption increase, a growing number of internet users are becoming involved with social networking. Companies are changing their business models and product offerings to be able to cater to the ballooning market of social media users. Banks and other financial institutions are engaging customers with social media, which is shaping up as a strong channel to promote new schemes, identify customer needs and receive feedback. Although the use of social media remains risky territory for many banks, some have started to explore opportunities in this channel and have set out many best practices examples that can act as guiding principles for other banks and financial institutions.
Banks are also investing in dedicated teams to handle user-generated content over social platforms. Although the sizes of these teams have so far been limited, they have proven to be effective brand-building tools; an active real-time response from a bank generates a positive sense among users that complaints and issues are being worked on. The teams have also helped banks to avoid fraudulent activity.
To alleviate security concerns, banks have started to offer highly encrypted and secure apps on social networks that allow users to enjoy bank-grade security while transacting directly through social platforms such as Facebook. Organizations are obtaining industry certifications and using dynamic passwords for apps to instill consumer confidence. With the rising threat of malware, viruses and other malicious applications, a surge in partnerships with organizations dealing in digital security such as Gemalto, McAfee and Symantec has been noted.
A primary question plaguing the banking industry on the use of social media concerns return on investment (ROI). There are doubts over the credibility of social media as a key component of business models due to a lack of tools to measure quantifiable results. Surveys such as those conducted by cmosurvey.org also suggest that the potential benefits are more of qualitative nature, limiting the potential for short-term gain. Banks are therefore sceptical about investing in an unproven and non-established area. Moreover, with limited budget allocations for social media activities, many banks do not have frameworks to handle exposure to reputational risk from user-generated content.
Banks have started to use various parameters such as unique visitor numbers, likes and followers to quantify the success of social media campaigns. Although these parameters do not necessarily reflect changes in profitability, negative and positive feedback, repeated visits and site conversion rates can indicate if, and how, a bank’s investment in social media is influencing customers. The advancement of analytical tools and the increasing maturity of banks on social platforms will open up more quantifiable measures to assess the impact of social media strategies adopted by banks over the next five years.
Despite initial skepticism by retail banks, social media is expected to emerge as a complimentary channel, rather than replacing existing channels such as television and newspapers. Financial services companies use various channels to market products and services, and consumer opinion is now measured as an aggregation of experiences across these channels. Over the next five years, banks are expected to focus more on synergies that can be generated by social media and other key channels, rather than calculating ROI in the social landscape.
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