Social Media: The next big channel for financial services
In the past few years banks have recognised the need to change how they interact with consumers and have embraced a multi-channel approach by offering both online and mobile communication options. One method of communication financial services have increasingly understood as becoming more important is social media. Gabriel Hopkins, senior director product management at FICO, an analytics and decision-making services firm, agrees that banks are shifting how they engage with consumers and predicts a lot more organisations will start providing social media channels for customer service.
"Consumers are now looking to work with banks and other financial organisations that are able to support the channels that they want to communicate on," he says. "I see a lot of organisations opening up the social media channel."
Recent research by Virgin Media Business revealed that the speed of customer service among banks has risen as more turn to social media to address inquiries. The study found that nearly two thirds of UK high-street banks using Twitter are now responding to customer complaints and questions within an hour. The survey comes after it was reported that all of the UK’s leading banks now use Twitter as a way of communicating with customers. NatWest was found to have the fastest Twitter response time for queries with an average of four minutes.
"Social media helpdesks are becoming common in industries where businesses interact daily with customers," says Phil Stewart, director of customer services, Virgin Media Business. "They’re becoming like virtual stores. It’s really encouraging to see the banking industry taking a lead on this. "Social networking sites are a great way to engage with customers in realtime, but simply having a presence is not enough," he adds. "Organisations need to make sure they’re interacting with individual customers and responding to queries within an appropriate time from when they first get in touch. Great customer service on any platform should be the rule, not the exception."
The Virgin Media Business study comes after a Gartner report last year predicted that social media will shape the future of the banking industry.
Gartner said digital mega-firms will alter the way the industry develops by making consumers better informed along with eventually providing niche financial services themselves. The firm’s vice-president, David Furlonger, says banking institutions need to understand the importance of moving away from traditional models and adapt. "Traditional models no longer apply to many of their customers or markets. They [the banks] have a series of questions to address: do they simply copy the new opposition, do they try and exert influence over the broader market, do they look for help and partners, do they need to fundamentally restructure?" says Furlonger.
"For many existing financial services institutions, mapping out the path to the future is proving extremely difficult and challenging." Power to the people Social media has increasingly given consumers power when it comes to their financial needs.
"Through social people are getting wiser to the fact that the moment something happens now you have the power to crowd – whether that’s on Twitter or with friends on other social networks," says Helen Clulow, head of product and design at digital banking provider, Intelligent Environments.
"People are also becoming aware that there are alternatives to conventional banks out there," adds Clulow. "It’s interesting to see how the power is going to the customers rather than to the bank itself. I think we’re going to see this trend continuing." Clulow says financial services looking to implement social media should start small and take incremental steps.
"It’s the same as mobile banking is now. People are gradually getting used to the fact they can actually make payments through it. I think the easiest way for banks to embed social media is to start with the basics and then increment quite rapidly forward. You will get traction with your customer base, provided you market to them."
Stock market Research by information delivery platform Colt Technology has revealed that public sentiment on social media channels is believed to have often influenced the prices of individual stocks. The study interviewed more than 350 UK financial professionals and found that 60% believe that public opinion played a role.
Hedge funds and proprietary trading houses are now able to scan social media data and categorise messages into a range of public mood states. An algorithmic or trading strategy is then used to place trade orders, giving them an edge over competitors who use traditional forms of data.
"New sources of competitive advantage will always be welcome," says Hugh Cumberland, solution manager at Colt Technology.
"What’s important is working out how best to leverage the data mined from millions of social media messages to help trading firms cut through inertia and deliver much needed volume." The company’s research also showed, however, that a third of respondents found the ability to respond fast enough to social media sentiment a barrier, while the volume of data also created challenges for creating successful trading strategies.
"Data mined from millions of tweets and Facebook posts will only add to the increasingly large volumes of information flowing through a firm’s IT systems," adds Cumberland.
"With additional capacity and bandwidth required to store, access and manipulate the millions of messages, social media analysis will need to be underpinned by an appropriate IT infrastructure to ensure a consistent, fast and reliable flow of data into the heart of the trading environment."
However, security experts say that banks should be prepared for the associated risks that come with dealing with customer data. In fact, some believe it may take several years for financial services to fully implement social media due to such issues. "Financial services organisations in particular are one of the most common targets of cybercriminals, and with highstreet banks’ rapid uptake of social media use, they need to be extra vigilant of any threats that stem from social networks being compromised," says Ross Brewer, vice-president for international markets at log and event management firm LogRhythm. "Interestingly, recent research showed that while 80% of the UK public implicitly do not trust organisations to keep their data safe, banks and financial services were ranked most trustworthy, while social networks and gaming sites were the least trustworthy organisations. If banks continue to increase their use of social media without enhancing their cybersecurity strategies, their reputation may suffer as a result." Jason Steer, EMEA product manager at FireEye, which deals with nextgeneration threat protection, agrees that financial service companies are often a target for cybercriminals, while banks should be cautious. "Banks experimenting with social media and offering mobile banking must be aware of all the risks and how to remediate them," says Steer. "In the same way that customers are accepting a certain level of risk in exchange for the convenience of using mobile and Internet banking, banks must ensure they are aware of all the risks involved and the best practises and products available to mitigate them, as they can ill afford the potentially vast fallout from a breach of customer data."
Graham Cluley, senior technology consultant at Sophos, suggests businesses make sure that two-factor authentication is in place so customers are properly protected when conducting transactions through the social media.
"Yes, it’s a great way to get in contact with customers and potential customers, but you also need to ensure it’s properly protected, and that you’re following best practice," says Cluley. "For instance, it’s essential you use sensible passwords – as well as ensure two-factor authentication is in place – to avoid having your account taken over by malicious actors. "This is essential as the damage that can be done to brands is considerable – potentially even more so for a bank, whose customers expect them to have security right."
Meanwhile, as FICO’s Hopkins concludes: "Customers will have a brand loyalty to firms that offer a certain level of engagement. It’s about getting to find out information in a timely way on the right channel at the right time, and I think social can be a very big part of that mix.