Social Media’s Time is Now
By Binesh Nambiar
Due to the current economic climate, banks and financial institutions are struggling to bolster their bottom line, retain customers and stay competitive in the marketplace. Financial institutions – specifically banks – are leaving no stone unturned to ensure that they provide the highest quality of service to their valued customers. Unlike the old days, when a bank could wait until a customer came onboard to learn about his wants and needs, today customers expect their banking institution to know them inside out before they become a customer.
Thanks to the advent of social media and the advances in technology, customers are now driving the sales process. Customers are getting savvier and taking a more active role in ascertaining whether a product offered by a particular bank is the best fit for them before they make any purchases. For example, customers can conduct their own research over social media networks to easily evaluate and compare other similar offerings on the market, and find out whether existing customers are happy with that product, before they commit to buying anything. As a result, customers are increasingly purchasing products and services from non-traditional providers who provide the best value to them. They are also getting more comfortable with alternative methods of delivery, including electronic channels.
On the flip side, communicating via electronic channels is also weakening the personal bonds between customers and institutions, as customers no longer want to remain loyal to any particular organization. An estimated 90 percent of financial services firms were expected to dedicate funds for social media initiatives in 2012, yet 60 percent of those firms still consider themselves to be social media novices. With customers spending more time and attention on social networks like Facebook and Twitter, banks, financial institutions and regulatory agencies are finally paying attention and incorporating social media into their communications mix. To that end, regulatory agencies are laying out social media best practices to guide banks and financial institutions on how to tap into social networks, while complying with regulations.
Some of these benefits include:
Creating Brand Affinity and Improving Customer Retention
Social media can play an active role in in shaping brand identity and influencing customers. By providing customers with an avenue for conversation, social media provides a great opportunity to create strong relationships. For example, banks are using social media channels to seek feedback on advertising campaigns, new promotions and changes to existing policies. They are gauging customer reaction before rolling out new services and correcting course if necessary. The reaction around the debit card fees brought in by the Bank of America is a case in point. The issue was well handled before the situation could go out of control.
Effective Customer Service
Using Twitter, Facebook and LinkedIn, banks can respond to customer issues and questions in real time. Issues resolved over social media channels provide a great opportunity to assure prospects and customers that a bank is committed to keeping its customers happy. A positive tweet, mention or post from a happy or satisfied customer goes a long way. Studies have shown that quickly resolving issues related to checking and savings accounts have led to better conversion on successfully cross selling other banking products. These channels also reduce the cost of maintaining expensive call centers by identifying dissatisfied customers quickly and empowering banks to deliver more personalized services to them.
Analyzing Customer Demands
Social media enables banks to capture customer suggestions and then analyze them to develop more tailored products and services. For example, establishing and nurturing customer communities to share insights on topics like retirement products to gain invaluable insight into customer behavior and develop future products as well as fine-tune products to align them with customer requirements. Many large banks seek inputs via these channels before launching new card products.
More and more banks are tapping into their customers’ preferred social networking channels to deliver targeted offers and promotions. They are also encouraging customers to rate products over social media. Access to data about customers’ shopping patterns, spending preferences and demographics can provide great insight into opportunities to sell additional products. For example, through social networking channels, banks can easily find out when a customer gets engaged or married, opening the doors for targeted sales pitches for mortgages, lines of credit or family insurance. In short, social media helps banks remain in touch with their customers and provide a more personalized service.
It’s Not Going Away
Social media is already driving dramatic changes in the way customers interact with their banks. The banks and financial institutions that recognize this opportunity and invest in social media can reap great rewards. However, the success of social media will largely depend on a bank’s ability to harness their existing IT systems’ for customer information and make the connection with their customers’ social networks. Also, instead of a siloed approach, the banks need to unify disparate systems that store customer information to gain an enterprise view of the relationship.
Given the swift pace of social media channels, banks will need to adapt quickly to develop appropriate frameworks that not only comply with existing regulations, but also provide a level of flexibility to accommodate the evolving nature of social media. In the long run, being prepared and ready for the customer will determine the success of social media projects.
Binesh Nambiar is solutions lead for banking and capital markets at MphasiS, a business advisory firm.