Much more than simply a way to communicate with friends or access news, social media can become a game changer for banks and credit unions that want to provide better service, educate consumers or even introduce new products and services.
Engaging with customers on social media platforms like Facebook and Twitter are the new norm for companies of all types and banks and credit unions need to make sure they are part of the digital conversation. In fact, a report by Facebook found that 60% of millennials want their bank to be a partner and friend, giving an opportunity for banks to step up in this regard. Let’s examine some of the challenges that the banking industry faces in implementing effective social media strategies, why social media is a worthwhile pursuit for banking organizations and examples of the successes that have been seen thus far.
Social Integration is the Next Banking Frontier
As people grow accustomed to the convenience of mobile banking and quick transactions, they will seek similarly convenient ways to receive information and communicate with their banks. A 2015 U.S. Federal Reserve survey revealed that 39% of adults with both mobile phones and bank accounts reported using mobile banking – a 33% increase in usage from 2013. The popularity of mobile banking is a sign that customers want convenient and quick access for their banking needs.
Millennials in particular want more flexible access to banks, with 48% wanting video chat available on bank websites according to Accenture. Integrating social media features for those who embrace mobile banking is a logical next step for financial institutions. While Facebook and Twitter might be the first two social media channels that banks turn to, some banks are trying out newer platforms. For example, Bank of America regularly shares short videos to its 17,000 followers on Vine and ABN Amro recently created a Snapchat following demand from their student customers.
These banks are proactively creating valuable content and engaging with them on platforms that their technology savvy customers regularly view.
Winning Consumer Confidence
By connecting with consumers on social media where interactions are by and large public, banks have a chance to establish a benchmark of fairness and transparency. Following the 2008 financial crisis, consumer confidence in financial services fell significantly and while the relationship has been repaired to some extent, it hasn’t recovered entirely yet.
Even six years after the start of the recession, a 2014 Gallup poll found that 30% of Americans had very little to no confidence in banks. Banks need to take proactive measures to prove that they deserve the trust of their customers. TD Bank is a brand that successfully demonstrates its customer servicer success through Facebook and Twitter. It responds to tweets within 46 minutes on average whereas Wells Fargo and JPMorgan Chase take four hours and 10 hours respectively. This timeliness helps TD Bank build consumer confidence and makes people feel like their bank cares about their financial wellbeing.
As further evidence that bank brands should pay close attention to how consumers perceive them, Netbase found that the top 10 banking brands scored below typical industry averages in terms of overall sentiment and level of brand interest. This overview indicates how it is harder for banking brands to capture consumer fondness and garner strong positive feelings.
Traditional methods of mass communications, like paid advertisements, will do little to solve this issue. Nielsen found that 66% of global consumers say they trust consumer opinions posted online compared to only 42% who say they trust online banner advertisements. As opposed to advertisements, social media is a form of earned media, which consumers tend to trust more. Social media involves two-way communication between the brand and the customer so banks have to strategically determine their social media voice.
The Hurdles of Social Media for Banks and Credit Unions
As banks scale back the number of physical branches, consumers need new touch points and resources to get the information they need and to enroll in products and services. Banks are turning to social media to establish those touch points with close to 9 of 10 institutions using Facebook, up from less than half only 4 years ago.
Despite this increased investment in social media, it is still difficult to measure the direct ROI for banks. The Financial Brand’s 2016 State of Financial Marketing Report found that bank marketers mostly felt lukewarm about the effectiveness of social media channels in helping them achieve their primary objective. While eight percent found Twitter to be very effective, 31% found it to be not effective. For more niche channels like Pinterest, only five percent of marketers felt it was a very effective platform and 36% felt it was not effective.
These findings show that banks are still in the experimenting phase of social engagement. As social media is primarily an engagement tool for banks, specific objectives need to be tied back to engagement to more effectively measure the effectiveness of social media efforts.
Instead of viewing social media as an uninviting platform, banks have to learn to use this medium to better communicate their value proposition. A survey conducted by PwC and the Centre for the Study of Financial Innovation of banking industry professionals across 52 countries found that North American respondents cited social media as a significant threat, due to the risk of damaging bank reputations. This finding shows that banking industry professionals are being defensive when it comes to communicating with consumers.
Perhaps the perceived risk causes banks to stick to the books when it comes to social media because a 2014 survey found that 87% of Americans find bank social media annoying, boring or unhelpful. Therefore, banks need to closely examine not only what their customers are looking for on social media but also understand the kind of tone and personality that is interesting and engaging.
Based on the increasing number of mobile banking users and the decreasing retail bank branches, bank brands need to seriously consider social media as a means of effectively communicating with their current and potential customers. While there is noticeable hesitation from bank executives, people are currently by and large unimpressed by the current state of social media outreach from the banking industry and this has to be turned around.
Despite being in a highly regulated industry, banks have the opportunity to win consumer confidence by being responsive and honest on social channels. Financial institutions that follow the examples of TD Bank, Bank of America and ABN Amro and invest in social media will likely reap the benefits in the near future.