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Social media usage for banks: Adopt or die!

Fast growing consumer adoption for several different social media initiatives is hard to ignore. Facebook recently announced that it has now 1.11 billion people using the site each month. More than 6 billion hours of video is being watched over YouTube on a monthly basis either web or mobile. 12 billion tweets are posted by +200 million active users each month (60% via mobile).

All companies are flocking into social media to swell their business with this enormous power. They use social media as:

  • a communication platform
  • a sales platform
  • an advertisement platform
  • a marketing platform and etc…

Graphic: Percentages of time spent while using smartphones

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New generation (millennials and digitals) are better informed and more powered customers. Business owners will need to listen these customers and lead the business transformation taking their needs and requests into consideration. This generation constitutes a considerable part of the customer profile now and this will be the same for several more years to come. Banks should also consider this new customer potential and change the way they do banking in some platforms.

A few banks started to use social media in different areas but when we look at the big picture, we can easily state that banks are lagging behind in usage of the social media compared to other businesses and sectors. A few have taken even tentative steps, but most of them haven’t even tried yet… Business owners in banking sector must acknowledge the fact that banks have to adopt social media in some form to stay competitive within the sector and be relevant to their customers.

The idea seems simple, but this idea generates bigger and complicated questions like:

  • “How can social media be used in banking?”
  • “How will I mitigate the risks of engaging with customers on an uncontrolled forum?”
  • “What will the impact of social media be on my existing technology environment?”
  • “Will customers really want to be ‘friends’ with their bankers?”

More and more questions can be listed above, but these questions do not hide the fact that social media forces banks to respond to an evolution in the way banks communicate with their customers. Opening a twitter account or creating a Facebook page for support and complaints can be seen as the first steps for a bank. Customer complaints that do materialize will be responded in real-time, as customers communicate their issues over social media channels and immediately acquire the attention of a customer service representative, who is not only empowered to solve the issue, but is also in contact with the branch for that particular client. These uncontrolled platforms have risks, but these can be minimized by using more powerful social media monitoring tools. This approach helps branches to focus on conducting more sophisticated products like loans and mortgages.

Loyalty is a never ending issue for the banking sector. Most of the banks are trying to find a solution to keep customers working with them, regardless of the banks’ sizes (small or large). Social media can be a key solution for the given loyalty issue, especially for generation Y. Now, more and more banks everyday start to mine their customer’s social networking activities such as “sharing”, “reviewing”, “influencing”, “advocating” and “recommending”, moving focus away from just transaction history and focus on a customer’s overall relationship with the bank. Being able to combine the social media activities of customers with real transaction history and activities, empowers the bank or any given financial organization to come up with predictable behavior analysis of the customer.  Availability of predictable behavior analysis lets banks to deliver better targeted offers and promotions. Responding the customer real needs on time, increases stickiness and creates a loyalty platform for the customers. Banks should also consider to integrate customer’s social data with the existing technology environment to form a social CRM field in their bank.

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A German Bank, Fidor, is the first bank in the world, where customers have a role in shaping the interest rate rule. The bank offers an interest rate on savings that is determined by the number of “likes” on their Facebook page. The rule being used in interest rates is easy: more Facebook likes get higher interest rate. Interest rates start from 0.5% per annum and increase as the Like count increases. By 25th of each month, if the bank achieves a certain number of Likes, then a higher interest is paid and calculated, starting in the month at the rate achieved in each case. From 22 000 Likes FidorPay will offer 1.5% interest per annum for the remainder of the year. At the end of the year, the interest rate is reset again to 0.5% per annum. This method lets Fidor Bank to form an engagement platform and to make their interest rates transparent for the customers.

Social gaming can also be used as an engagement strategy, but banking is a difficult sector to implement such a social game. At that point, gamification concepts can be applied instead of social gaming. Gamification can be explained as usage of game design techniques, game thinking and game mechanics to enhance non-game contexts. BBVA has tried to realize this idea with its release of the Spanish-language BBVA Game, a gamification platform to encourage their customers to use the bank’s online banking services. The BBVA Game looks like a typical points, badges, and leaderboard system but actually BBVA created a virtual economy around the point system. Customers are awarded points for activities, such as using specific online services, watching educational videos or contracting new services online. Badges are awarded for completing challenges and leaderboards cause competition. Customers can win music or movie downloads or even tickets to tickets for La Liga. This game was played by 100.000 customers in six months, which proves that this can be declared as a success story.

Integrating social media with bank’s internet banking or other web platforms cannot be sufficient at the moment. Mobile internet usage is growing fast and most of the generation X and Y use mobile platforms more than desktops. In order to find an appropriate solution to keep customers, banks must also consider to have a mobile channel for all innovative developments. Otherwise, applied innovative solutions and new developments will have to be sentenced to a dead end. As a result, social media integration in bank’s existing mobile platforms must be considered or a new social media integrated application can be positioned as a distinct mobile channel depending on the bank’s strategies.

Graphic: Mobile internet growth

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Peer to peer assistance, peer to peer lending, personal finance management with all bank accounts, credit cards, non-banking assets, global payment capabilities like Facebook credits, bitcoins, World of Warcraft Golds, etc… (called as hyperWallet) are the ways that banking sector will continue to implement. Social integration is the most important common denominator to consider over all these issues. Recent growth and interest in social media is driving banks to learn more about social networking and how tools such as Facebook and Twitter can help them to better engage customers, partners and employees, build their brand, reduce cost, boost innovation and increase revenue.