The use of digital channels by retail banks has grown rapidly over the last decade. The trend is set to continue with banks increasingly incorporating the use of social media, which will assume a more significant role in marketing strategies over the next five years, writes Hannah Smithies
With increasing amounts of competition between retail banks worldwide and a lack of leverage since 2008, banks have had to find alternative ways to increase profit.
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Social media presents a compelling opportunity for retail banks; as internet access and use of smart-phones and tablets increase, platforms such as Facebook, Twitter, Linked In and YouTube have an ever growing audience available to engage and interact with.
Banks can gain a comparatively low-cost form of marketing, whilst customers benefit from a more immediate response, transforming the crowd-sourcing process and improving the professional-customer relationship. Instant online interaction can potentially improve customer service whilst influencing the role social media plays in consumers’ purchasing behaviour.
Social media has had a significant effect on consumer tastes and preferences. More than half of social media users make reviews about products or services’ value, price and quality. These customer-generated reviews are increasingly trusted, which is unsurprising considering nearly 80% of people prefer peer recommendation over agents and intermediaries to decide what products to use according a survey conducted by RBI.
Globally, banks have already started tapping into the power of peer recommendation, offering basic social media interaction by promoting new schemes, sharing information through text and video, identifying customer needs and receiving and responding to feedback in real-time.
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By GlobalDataFor example, in April 2013 Wells Fargo used Facebook to ask customers to share ideas that they would like to find in its stores. ASB Bank has opened a virtual banking branch on Facebook which allows users to chat directly with bank employees and receive information on a range of subjects including loans, foreign exchange conversion and automatic payments.
However, not all banks are ready to put substantial investment behind social media and many banks already employing social media marketing strategies remain cautious. Dedicated teams have remained small while campaigns have had relatively short tenures and been limited to serving narrow remits.
A major issue associated with social media is that it’s very difficult to calculate the return on investment, banks are therefore sceptical about investing in an unestablished and as yet unproven area.
Lack of quantifiable measures has resulted in doubts over the credibility of social media as a key component of the retail bank’s business model. Recent surveys such as those conducted by cmosurvey.org suggest that the potential benefits are inherently more qualitative which limits the potential for short term gain.
Furthermore, social networking sites carry a risk of malicious attack and attempts of data and identity theft due to the nature of the open platform sites. Fake accounts, hacking, spamming, use of links containing malware, spyware and Trojan horses all contribute to a state of unease around wholehearted adoption of social media. Banks need high functioning, costly security across social media sites in order to protect themselves and their customers.
Security aside, banks do not currently have the infrastructure to deal with the potential risk to brand reputation leading from negative content created by both customer and employee on social media platforms.
Close to one-third of social network users tend to post negative comments and reviews on banks ‘official pages’, leading to fears that other customers may be swayed and less likely to continue their relationships with the bank in question. In China, as many as two-thirds of all posts and comments on banks accounts are negative which has led to many of them hiring people to post positive feedback.
With the advancement of analytical tools and the increasing maturity of banks on social platforms, one can expect to see more quantifiable measures in the future.
Much of the unease towards social media felt by banks is due to the fact they tend to have have a limited knowledge of digital marketing. Through extra funding and the increasing use of partnerships with third party professionals, banks will gain confidence and be able to offer increasingly innovative services and attractions online such as gamification of the social profile.
Spanish Bank BBVA have already had success with the online BBVA Game, which allows customers to earn points and redeem them for products and services. The platform currently has more than 110,000 registered users.
Improved funding will also allow banks to overcome security concerns. Organisations are obtaining industry certifications and using dynamic passwords for apps to instil consumer confidence while partnerships with experts in digital security such as Gemalto, McAfee and Symantec have increased.
Some banks have started to offer highly encrypted, secure apps on social networks that allow users to enjoy bank-grade security in order to make transactions online.
In February 2013, American Express enabled its credit card customers to purchase items directly from companies such as Sony and Microsoft simply by tweeting. Banks in Nigeria and India offer credit card application and e-payment services within social media sites. Looking ahead, many other banks will follow this model and increasingly deliver financial services through social media, creating the concept of "social banking".
With the slow mass adoption of mobile wallets a precedent, social banking may take some time to emerge as a major force. But as social platforms and banks both develop in the next ten years it will be possible to discern its market potential. Nevertheless, despite initial scepticism by retail banks, social media is expected to emerge as a complimentary marketing channel in the next five years with banks focusing more on synergies that can be generated by social media and other key channels, rather than calculating return on investment in the social landscape.
