Hesitation Hampers Banks' Social Media Opportunities
Retail banks have always been somewhat conservative when it comes to new technologies, but they are especially behind when it comes to social media, according to a new report from Ovum.
It's especially common in Europe, where banks "find themselves at the back of an underperforming class when it comes to social media engagement, voicing concerns over data security, ensuring data privacy, as well as the potential reputational damage that can come from a mismanaged communication," Jaroslaw Knapik, senior analyst in Ovum's Financial Services Technology Practice, concluded in the report, "Social Media Trends in Retail Banking."
He does predict, however, that in three years, social media will become a significant channel for retail banks. Banks in the United States and Asia-Pacific are already spearheading approaches to social media engagement, believing it to be a disruptor in how they will interact with customers.
But for them to be successful in the social media space, banks are going to have to evolve their use of Facebook and Twitter as true customer engagement tools rather than just using them to broadcast company messages to followers, he suggests.
Social media, Knapik explains, "provides a powerful marketing platform for understanding and engaging with customers, allowing banks to improve sales and profitability."
But before that can happen, they will need to understand and implement relevant risk and compliance requirements to ensure data security and privacy.
The same concerns carry across to the investment sector, but financial advisors are fully embracing social media as an important tool to engage clients, grow their businesses, and better understand clients' investment goals, according to new research from Accenture.
Accenture noted in its "Closing the Gap: How Tech-Savvy Advisors Can Regain Investor Trust" report that nearly half (48 percent) of financial advisors use social media every day to interact with clients. Additionally, 74 percent believe social media helps them increase assets under management, half have used social media to convert prospects into clients, and 48 percent say that if they don't leverage social media, they'll lose clients to firms that do.
Of those financial counselors who are on social media, 60 percent are managing portfolios of more than $20 million, according to the research.
"High-worth clients are more likely to be on digital channels," Alex Pigliucci, global managing director of Accenture Wealth and Asset Management Services, tells CRM magazine. "They are very well-educated and tech-savvy."
And it spans age groups, the research finds. While Millennials still lead the pack—among both investors and investment counselors—on social media, the channel is growing among Generation X and Baby Boomer investors. "A significant portion of the U.S. population is already online, and they expect their wealth management firm to be there as well," Pigliucci says.
Surprisingly, though, even in the investment counseling segment of the financial services industry, many of the advisors who are using social media are doing so under the corporate radar. "The advisors are comfortable using social media, and they are doing it regardless of how comfortable the firm is with it," Pigliucci says. "Many firms are not ready on a company level."
The reason for this, across the financial services industry, is that many firms have already suffered from damaged reputations as a result of the global financial crisis. This, coupled with privacy, compliance, and partnership issues, causes them to limit what they do on social media.
"Firms want to use [social media] as an advertising billboard," Pigliucci explains. "The majority of the larger firms are probably monitoring [social media], but they're not really controlling what's being said."
Pigliucci says social media can benefit financial services firms in many ways. "Digital and social media tools can help advisors by increasing the frequency and quality of two-way communications with clients," he says. "Firms need to implement deliberate social media strategies and provide their advisors with the tools and guidance to make their digital interaction meaningful. This will help create tighter client relationships, increase the firm's visibility on digital channels, and ultimately drive business for the institution."