Retail banks face the prospect of disintermediation if they fail to prepare for the swelling interest in new media technologies and social networking by their customer base, according to analyst house Gartner.
Social banking won't change the consumer banking model immediately, says Gartner, although retail banks that understand social media, financial social networks and microfinance have a better chance of adapting their services.
Gartner defines social banking as an emerging approach to retail banking that makes depositing, lending and the connections between depositors, borrowers and financial institutions transparent.
Stessa Cohen, research director at Gartner, says the definition removes the banks from the centre of the customer relationship: "Instead the bank takes its place among a series of loosely connected financial and social relationships mediated by online social-networking media and tools."
Without planning for the emergence of this new financial services environment, retail banks will not only be disintermediated, but also miss a significant opportunity to transform their operations and customer focus, she says.
Cohen advises banks to first create a social-media strategy and ensure that they have the technology required to implement a social-banking model. They should then evaluate opportunities to create partnerships between retail banks and social-banking providers, rather than trying to build their own social networks.
Banks are also advised to plan for greater transparency on pricing and service in the organisation and use this transparency to compare pricing with that of competitors and to expose pricing strategies that reward loyalty from customers and encourage multiple account holdings.