The banking sector’s approach to social media thus far can broadly be described as ‘willing but watchful’. That’s understandable, considering the compliance risks of committing to a medium where regulatory boundaries are still fuzzy. The reputational backlash to some first-mover efforts also hasn’t helped.
But that picture is changing rather rapidly. A leading analyst predicts that almost a third of retail banking customers would have purchased social integrated products or services by end 2016. In three years, social media will become a significant channel of retail banking in Europe, which currently lags Asia-Pacific and the US in this area.
Globally, around 44% of people already rely on social platforms for information on banking products and services. According to a US poll, information made available on social media delivers the highest conversion rate (~18%) amongst customers with intent to buy. In contrast, conversion rates from banking websites, CSRs (Customer Service Representatives) and even branches are in single digits. Banks cannot afford to overlook this customer acquisition opportunity.
Today, although banks have some sort of social media presence, it is mainly used for delivering marketing content. In 2014, banks will embark on more comprehensive social strategies that explore the complete range of possibilities in the medium including transactions, personalization, trend analysis, credit risk management, customer service and crowdsourced innovation.
The regulatory ambiguity is also beginning to lift. Early last year (2013), the Federal Financial Institutions Examination Council (FFIEC) released a guidance document detailing a broad structural framework for US banks to consult for their social media programs. In India, the Institute for Development and Research in Banking Technology (IDBRT) has launched a similar guidance for Indian banks in their social media efforts.
So in 2014, banks will step up the scope and pace of their social media plans. Regulation also shows definite signs of catching up. But the important thing to remember is that the customers are already there and waiting.
Also read our blog on the Apps as a banking trends