Social Media in Banking: Ten Business imperatives for Banks Date:   Thursday , August 04, 2011 Financial Institutions all over the world are embracing the Social Media as alternative channel for expanding the banking services and improving the communication with customers. However, banking industry is still in the early stages of evolution with respect to social media initiatives (SMI). Currently the number of SMIs is relatively small and is expected to grow rapidly. While a lot of banks consider these as ways to gather information about the customers and profile them to position themselves favorably, they are unclear of the objectives and benefits of social media. Early adopters of social media in the banking industry have faced a few challenges in the approaches and in attracting attention from large number of customers or prospects. Some are already revamping previous avatars and re-launching the new portals to find success in these initiatives. Some questions in the minds of the bankers are: * Do customers like others to know the financial transactions they have performed or would they like to discuss these with community at large in the open forums? * Aren’t financial services more personal and hence are the banks’ and their customers ready to share them in the social space? * Will these open up channels which invade on the privacy of the banks and the customers? Let us discuss the key business imperatives for the banks to leverage social media. 1. Alternative channel: Many banks have leveraged SMIs for launching the innovative service channels such as blogs or social networking sites. While these may not replace the existing channels for banking, they are expected to complement if integrated well with other front ending channels and the back end hosts. Each of the early adapters such as Fortis (Join2Grow), ING (pickuradvisor), Barclay card (wtfcollective.com), BOA (Small Business online community), Amex (Open Forum), SEB (The Benche), HSBC (yourpointofview.com) in the social media space have approached it differently and are trying to create differentiation. 2. Building communities: Research has shown that community users have remained customers longer than others. With right segmentation, banks can target their business processes, products and services around these communities. Social media communities could potentially call for internal as well as external change in the way banks’ function in this decade. External to the organization, SMIs will help shape the customer behavior and trigger internal changes in building capability and agility for servicing the customers. Several other industry sectors have already leveraged SMIs and offer customized and personalized products. Travel industry for instance, has seen some initial successes. Banks have started building communities for small businesses, trade finance, cash management; SME markets or customers are a good target segments for the banks to build communities; likewise, the GenY, in 18 to 25 years, for education loans, credit cards, young student accounts. Take for instance, the young working professionals with 2-3 years of experience and planning to take up management education for career advancement, as a target community; they have common interests in like institution ratings, grades required, educational loans offered in the market place. Success lies in the ability to demonstrate the understanding of the segment / market requirement and convince people of the value of your platform and to give them a good reason to use it. It has to be simple to register and intuitive to use. Research has shown that consistency and persistence is extremely important for long term success of the social media banking. 3. Communication: One of the biggest advantages of SMIs is low cost communication of the events, news, product launches, milestones and achievements by the bank. Unlike traditional modes of communication, social media portals truly work as two way communication channel. For a retail bank with large customer base this could give a significant advantage by usage of Hashtags, Blogs, Audio & Video Podcasts, Online chats, Discussion Widgets; in the SME segment, peer-to-peer communication as a means of creating communication channel across customers can be extremely effective. 4. Development on Web2.0 and leveraging technology : Two important aspects of the Web2.0, ‘Web as a platform’ and user positioning of ‘Member controls data’ can be leveraged well by the banks using SMIs as well as integration with Facebook, Twitter, mySpace, iTunes, YouTube etc. Formulation of legal & corporate policy on the information security, authentication for members, firewalls for access have and monitoring on a continuous basis is extremely important in this context. As for technology implementation, banks’ should use re-usable components, which can be built once and sharable across channels, and systems. While there are several independent sites in the context of banking industry, banks can build specific portals to suit the objective, positioning and target communities. When the banks launch platforms leveraging the latest technologies such as Web 2.0, success does not come by easily and multifold increase in benefits may take few months or quarters. SMIs should not be led by technology team alone, success will be limited if the CEO is not involved in driving the change. Leveraging technology by integration of platform & process can be extremely powerful to achieve the objectives with respect to a target customer or segment. 5. Empowering customers: Financial services are based on relationships and hence the banking SMIs need to have a model where the generic solutions can be offered in the social space and the specific ones in the private space; While GenY is less apprehensive of sharing the information in the social media, many other segments have a different point of view. Usage of personal financial tools or modeling tools can truly empower customers. Large corporations are going beyond the financial transactions to engage & empower the customers; by the active participation of the members in various initiatives such as the environmental action groups, CSR initiatives etc; Citicards’ campaigns such as CitiForward, Make a Difference, One Friend at a time, are examples of approaches to harness the social networks, combined with charity giving or participation towards a social cause. Some of the retail industry giants have been able to garner commitment from the customers for saving energy, reducing waste and water management through SMIs. However, sometimes, the empowerment may go beyond the usual business relationship and pervade across larger management decisions; recently at a large European bank which was bailed out by the government in the financial crisis, online campaign by customers’ in the social media space has caused the bank to disallow bonuses awarded to bank executives! 6. Fulfillment through customer service: Typical banking customer expects personalized service offering and is willing to share the feedback in the social media, hence customer reviews should be an integral part of the customer service portals. Customer expectations have changed in the digital media era; expressing online and expecting the response and reason behind an incident is very common now. Ability and willingness to respond is the key to build and improve the customer service on this channel like other channels. SMIs offer windows of opportunity for the banks to render improved customer service by integration with the social media applications like Twitter or Facebook. For example, embedded live Twitter feeds help in making the service effective for the GenY customers. The trick is in making the portals more and more open, but give extra value to the target groups or individuals. Perception among the Banking community is that the User Generated Content has several risks though the customer listening mechanisms have the power of leveraging the knowledge of millions of existing customers as well as prospective customers; well then, would the portal become a customer grievances forum! Admitting mistakes and posting corrective actions will build the customer trust and perceived as improved customer service. If managed in a right way, and if banks can carefully strategize, some of the contributors to the social media sites can be converted into potential brand communicators. 7. Global Brand building through Marketing & Promotion: Social media portals can be a market place where customers can see comparative analysis of the products and services. Embracing and achieving success in the social media banking can potentially create ‘Most engaging Global brands’. Many banks have channel banking specialists who are recharging themselves in to roles such as VP-Social Media, E Commerce Marketing Manager, and Account Managers for Twitter, Facebook, Experiential Marketing Managers, Content Managers, Web2.0 specialist etc. Success lies in having a senior level executive who understands the social media space for creating the most visible initiatives. Banks have to take cognizance of the fact that SMIs can also adversely impact the brand reputation! 8. Honesty, Trust & Transparency: Being an ‘Honest organization’ is considered a differentiation in the context of the global financial crisis, more importantly for financial institutions. SMIs can help build trust and transparency by having a platform. Financial institutions have to rethink and rework on the strategies to keep the customer loyalty by sharing ‘relevant’ information with customers. SMIs provide great opportunity to mitigate the risk by participating in and building trusted relationships for long term sustainability leading to growth. 9. Influencing additional revenues: In a scenario where customers would like to get or at least perceive that they get customized offerings based on the relationship and wallet size, how can banks leverage the social media for additional revenues? Effective engagement should lead to increased revenues by developing private business content and offering differentiated service by sieving through the milieu of opportunities. ‘Return on Engagement’ then, could be a measure for tracking the growth of business, user base, increase in leads, number of products and services per customer. 10 Joint product development: Co-creation of products and services over a period of time is another key business driver for the banks to embrace social media. It is a means to understand the needs and requirements, build new products or services and ‘soft launching’ in smaller communities to meet their interests, especially for cooperatives, credit unions and town banks. In the context of large banks, customization of the products for various communities by active involvement of the user groups is a possible approach. Rewarding the members for visiting, promoting and contributing to the ideation and product innovation is important to sustain this model. Like it or not, banks cannot stay away from the Social Media Initiatives; however, they need to choose what suits them most in their context! The author is AVP & Unit Planning and Assurance Manager, Infosys