Trends

Technology

The role of social media in SME banking

While the banking and business worlds have been preoccupied with the economic crisis, another major change has been unfolding: the social-media revolution. It is one that will also affect the ways in which they operate in the future. The issues it raises were recently discussed at Efmas Business Banking Advisory Council.

Phil Allcock
Efma

phila@globalnet.co.uk

ver the past few years, there has been an explosion in the use of social networking, particularly amongst individuals and small and medium-sized enterprises (SMEs). However, banks have been relatively slow to respond to this important trend. What is happening in this area, and should banks be developing a more cohesive social-media strategy for their business customers? The consultancy Experian Hitwise reported that in the 12 months between March 2009 and March 2010, the weekly market share of Facebook in the United States almost tripled and Facebook was attracting as many visitors there as Google. An IBM survey also showed that YouTube and other on-line video sites were winning more advertising revenue than TV channels. Meanwhile, the power of social-media sites such as Twitter has been growing. For instance, after appearing on a UK talent show, amateur singer Susan Boyle shot to international stardom -- largely as a result of a tweet sent by U.S. celebrity Demi Moore. Other examples that have more direct implications for banks include the singer whose guitar was mislaid by an airline. His song complaining about this attracted hundreds of thousands of hits on the Internet. Banks are only beginning to learn the dangers of ignoring complaints on Web sites. Social media enable aggrieved individuals to voice their concerns to the wider community. There is also a growing tendency for people to band together on social networks to give themselves an even stronger voice. Leveraging the platforms How is this affecting the business world? Many SME customers prefer to spend time on social networks rather than on bank Web sites. So, how can banks use these platforms to manage customer interaction

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and awareness? In February 2008, BusinessWeek was already telling its readers: Social media will change your business. The magazine advocated a greater use of blogs and also mentioned the increasing influence of sites such as Twitter, Facebook, YouTube, and MySpace. One bank executive observes: From our experience, the video content of these platforms is the key to attracting customers. We had a video on YouTube. The experience has been very good: people talked about it and shared their views of it. We achieved more deals, not only from the campaign itself but also from another film about the making of the original video! We are also promoting financial products on Facebook, with links to our Web site. Facebook is perhaps one of the main new methods of communication for the younger generation and is now more popular than e-mail and Windows Messenger. Indeed, it seems that people of all ages are active on social networks. A survey by Nielsen Online suggests that the largest Facebook audience comes from those in the 35-to-49-year age bracket. Banks must take notice of such developments: they need to be where their customers are. They must be able to interact with them, and shareholders, in real time on these new platforms. More recently, Erik Qualman has explored the impact of social media on business in his book Socialnomics. Social media is living and breathing and it touches every part of an organisation, from Customer Service to frontline sales, even Human Resources and Information Technology, he says. In Efmas Advisory Council meetings, there have been reports that many business customers are starting to demand and expect more interaction with their banks through social networks. There was a suggestion that banks that take up this challenge could also boost customer-satisfaction levels. A muted response So, how should banks respond to these changes? A survey by consultancy Peppers & Rogers for Efma notes that few banks have a well-developed social networking strategy. Those banks that deliver an excellent customer experience are more than twice as likely to be involved in social media, however. This suggests that the ability to use social networks to listen, learn and respond to their customers has given them a competitive edge.

The next step might be to integrate new developments such as mobile banking with banks social networks and video content.

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SME customers may prefer to spend time on social networks rather than on bank Web sites. Banks can use these platforms to manage customer interaction and awareness.

A recent survey by Ovum suggested that most retail banks do not plan to enter the realm of social networking. Yet this could have a major impact on their future profitability and success. The banks without a social media strategy are [] placing themselves in a vulnerable position compared to competitors who have realised that social media can and must play an intrinsic role in their business, says Ovum analyst Martha Bennet. Some members of Efmas Business Banking Advisory Council have given examples of banks that are becoming more involved in social networks such as Facebook and Twitter, with the aim of keeping in touch with clients and prospects. One reported that his bank had developed a Facebook site for customer service. It has been using this to develop initiatives to learn and manage the behaviour of business owners. He commented: To give a better service, you get a quicker answer on Facebook. Other examples included the first European bank to have a company page on LinkedIn. At least one financial institution has launched a customer service channel on Twitter that is available 24 hours a day. This is totally integrated and acts as a service channel to the banks Web site. Scanning the networks Even when banks participate in social networking, it is often in a very limited way. Peppers & Rogers found that most of the communication is one-way: either from the bank to the customer or vice versa. This means that the full potential of social networking isnt being explored. One of the aspects of communication that has perhaps had the greatest impact on banks has been the use of complaints on socialmedia sites. Businesses that are unhappy about their banks service sometimes vent on Twitter or Facebook. They often find that if they do so, they are more likely to get a prompt response from banks that use these sites than if they complain through normal channels! Banks can also use social networks to provide a crude measurement of the popularity of their brand. They can detect information (such as complaints) and respond via sites such as Twitter. The latest software enables social-media sites to be scanned for anything mentioning the banks brand. In the United States, several big banks already respond rapidly to negative comments on Twitter, as the potential consequences of not responding quickly are damaging.

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Of course, its also important for banks to use these sites to communicate news and information to their customers. However, the true value of social networking starts when banks engage in a real dialogue with their customers. They then need to take this a step further, by using social media to provide added value, offering advice and recommendations, and selling products and services. The Efma and Peppers & Rogers survey suggests three ways of starting the ball rolling. First, banks should identify the specific socialnetworking communities in which their customers are active and in which the banks presence would be helpful and welcome. Second, they must be authentic in all of their social-media conversations (including the acknowledgement of any mistakes). Third, they need to listen to and learn from social-media conversations so they can understand the real issues that concern their customers. They can then start to develop further strategies. One Advisory Council member said: We are now working with marketing and communications teams to develop processes around social media. We are also looking at the role of social networks for our employees and how can they use it to be more real in their conversations. Another adds: The way we communicate with our customers has to change. The challenge is that we are no longer able to control the information that our customers access. They can obtain most things from the Internet and from social media. We need to come to terms with this and empower our customers with the right information. We must also become involved with the peer-to-peer contact process: we must engage in it. Its not too late One bank has already created an on-line social-media site and has asked its employees across the world to talk about what they have been doing at work. At the moment, this is open only to about 200 people. The bank reports: This approach has been very powerful for accelerated learning. The engagement has been phenomenal, so the way we communicate internally with social media has to change: it is an opportunity to accelerate our own development. There is now a huge convergence of Internet, TV and mobile phones (which have more and more capabilities). The next step therefore is perhaps to integrate other new developments

Banks that deliver an excellent customer experience are more than twice as likely to be involved in social media. The ability to use social networks to listen, learn and respond to customers has given them an edge.

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such as mobile banking with the banks social networks and video content. So, the opportunities are there for banks that want to take advantage of them. One Advisory Council member commented: The best strategy is to try to be the same bank on all channels including social media. Customers value authenticity but they also value banks that keep pace with the technological developments that they have already embraced. Its not too late to act, so banks would be wise not to let the opportunities slip away. n

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