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Banks Must Adopt Social Media For Their Customers Sake

A Nielsen IAG online survey conducted two years ago showed that customers who had seen more advertising by their financial service providers (banks, insurance firms and investment firms) were more confident about the financial health and soundness of those institutions, leading a senior executive at the research firm to conclude that  “…. ‘out of sight' can mean ‘out of business.”

In that context, the findings of a recent study on the social media habits of retail banks are quite worrisome: 60% of respondents have no plans to use social media and very few (6-7%) plan to use it to address customer queries.

If, as the Nielsen study says, advertising/ media exposure is indeed a key component of customer confidence, by absenting themselves from the highly visible social media, are financial institutions shooting themselves in the foot?

Experts certainly think so, and say that banks lagging in social media adoption are vulnerable to being overshadowed by their faster-moving competitors.

Although there are several regulatory and security-related reasons for banks to approach social media with caution, there are as many reasons why they should go ahead for their customers’ sake:

• Customers are receptive to the idea of a social ‘customer service’ channel. Wells Fargo, among the most advanced banks on the social curve, uses Twitter to answer questions about checking, savings, and online banking accounts.

• Customers want to participate in financial product development, and social networks provide the ideal co-creation platform. First Mariner Bank asked questions on social networks, and used other social tools to identify what was needed in the market. The result: a new type of checking account, which is seeing success.

• Customers trust banks that are transparent and open in communication. Social networks score big in this aspect, stripping customer engagement of any official veneer, and allowing customers to directly connect with their banks. Some banks have brought unprecedented transparency to the banking relationship by getting very senior executives to answer customer queries one-on-one in their blogs or disclosing how they’ve used funds received under various bailout programs, and so on.

A pretty convincing argument, don’t you think?


Comments: (1)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 22 May, 2011, 12:00Be the first to give this comment the thumbs up 0 likes

The argument is convincing, no doubt. As I'd recently blogged and commented on Finextra, banks have found lighthouse implementations of social networking in FIs like NetSpend. In theory, they should be able to forge ahead with their social media projects no longer concerned about how to overcome compliance and other hurdles.

However, in practice, if as much of 60% of retail banks have told Nielsen IAG that they have no plans to use social media, lack of awareness of its benefits can't be the sole reason behind their stand. While we can never be sure what their other impediments are, there are a few obvious clues that let us do some crystalball gazing.  

Whenever a customer / prospective customer raises a query or complaint by using the bank-prescribed channel (viz. online form, email), very few banks promise to respond in less than 24-72 hours (some don't get back even after several days, but that's another story).

Maybe banking is intrinsically complex. Maybe systems and processes in banks are sluggish. Either way, if "24-72 hours" is the fastest response banks can muster up, they are possibly better off staying away from social networks where response times are measured in seconds / minutes. They might have astutely concluded that no social media presence is perhaps better than bad social media presence!

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