Social media and banks - When are financial institutions going to the join 'the party'?

9 November 2011

Twitter, Facebook, YouTube, LinkedIn - as technological innovations continues, an increasing number of communication channels are appearing. And as consumers spend more of their time living online, the banking world is doing its best to keep up.

Recent research by Amplicate suggests that financial institutions need to try much harder if they are to keep pace with digital natives and tap into the potential benefits of ‘social media’ as a networking and communications tool. The study showed that opinions of large banks in both the US and Europe on social media platforms were much more negative than positive - 83 per cent of opinions on major banks in the UK and Europe were critical, the report revealed.

Many commentators suggested that Bank of America’s (BofA) decision to not introduce a debit card fee for consumers was in part inspired by customer complaints on Twitter. According to the Huffington Post, ‘debit card fees’ was trending at one stage after the bank’s announcement of the new plans.

On announcing the bank's change of mind, David Darnell, co-chief operating officer at BofA, said: "Our customers' voices are most important to us. As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so."

Despite this scenario illustrating the power of social media as a tool for sharing news, voicing opinion and spreading influence among consumers, financial institutions are struggling in their attempts to use it effectively. Juan Alvarez, chief executive officer (CEO) at Amplicate, said that compared with the major players in other major industries, banks are behind with their adoption of these communication platforms.

“In every other industry we've covered, even when social media users are negatively disposed towards the industry, we've found at least one or two major players that receive more love than hate on social media. The banking industry is the exception.”

He said that banks should look to other industries to learn how best to harness the potential of platforms such as Twitter.

“If you look at some supermarkets or airlines some of the major players have Twitter accounts with huge numbers of followers. Those that do have a big presence on social media receive the most love on social media,” he explained.

Amplicate’s study showed that Wholefoods Market has one of the biggest audiences on Twitter with nearly two million followers and is hugely popular with over 90 per cent of comments on the firm being positive.

Mr Alvarez said there are many ways for banks to use these channels more effectively - and cited customer engagement as key.

“Engage, get followers, listen to what people are saying about you on social media. Give consumers a way to reach you on social media; that way they’ll be more inclined to think you’re listening to their issues … the more you engage and the more you monitor social media, the faster and more effectively you’ll be able to deal with consumer problems.”

Ron Shevlin, senior analyst at the Aite Group, said that although customer engagement is seen as crucial, many banks struggle to understand what this really entails.

“Defining ‘engagement’ is where the rubber hits the road and you really find that most financial institutions don’t really know what it means to have a conversation with a customer or prospect online.”

An Aite Group study from last year, Social Media at the Starting Blocks: A Look at Financial Institutions in Europe and the United States, revealed that six in ten financial institutions consider themselves to be novices in this area.

However, the analyst pointed to ING Direct’s establishing of We the Savers as an innovative and effective way of a bank utilising social media. The organsation’s Facebook group is an online community where consumers share top tips on saving money.

Shevlin said the firm manages the platform as it tries to increase community engagement but it’s not about them bombarding users with ten marketing messages a day.

“It’s about fostering communication, which is a point missed by a lot of financial institutions. They set up a platform for other customers and prospects to talk with each other and that’s valuable engagement. It doesn’t have to be all about the engagement with the financial institution.”

He concluded: “It’s like going to a party where everyone is already talking among themselves. The banks are late to the party and what should they say? Do you break into someone else’s conversation? Do you stand in the middle of the room and expect people to come to you?”

Although it still is not immediately obvious how banks utilise this new technology the power of social media is increasingly apparent. To stay ahead of the game, banks need to learn how to effectively keep control of their communications. Otherwise they are in danger of being left behind.

By Jim Ottewill

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