Financial services industry embracing social media channels.

Young customers today expect financial institutions to communicate using social media or online outlets. This is the conclusion drawn from a survey conducted by KRC Research that queried on what steps banks could take to regain customers’ trust.

The trust of young customers in banks and other financial services firms went for a tailspin ever since the economic crisis worsened late last year, which culminated in the bailout of AIG and other banks. Thereafter, financial services firms are seeking ways to overcome this distrust and use technology solutions to build lasting relationship with their young customers.

One way is the use of online blogs, wherein customers pose questions and bank executives reply to them. Other technologies that improve communication between banks and their customers include social networking, two-way blogs, and micro-blogging sites like Twitter. Other communication channels that banks can use are monthly e-mail updates, online live chat with staff, a personal web portal, text message updates, webcasts, podcasts, and financial applications for smart-phones.

Banks can use social media for product research by getting insights into customers’ needs and opinion of their services. Banks can then bring improvements in their products accordingly. They can also use social media channels for customer service, marketing, and promotion. In the long term, the increased transparency that these channels foster helps enhance public trust in banks.

In adopting these tools, banks also need to adapt some social media culture and its offerings into their own marketing and communications plans.

Tags: branding, marketing, social-media

Comment by Steve Lubetkin on November 6, 2009 at 1:20pm: Banks continue to be frightened by social media. My experience speaking to the NJ Bankers Association marketing conference earlier this year is a good lesson. Marty Daks from NJBiz.com was there and reported on what happened.

Comment by Rekha Vatsa on November 7, 2009 at 1:39am: According to my observations, social media networking channels are gaining nowadays a really powerful position, and it doesn`t really matter which business field we consider. it simply seems to be working everywhere. People are "connected" nowadays so social media marketing campaigns beside cutting marketing costs, give also a great opportunity to listen to the customers` voice. Their opinion might be crucial for further products and services improvements or even developments. However, i agree that from certain perspective it might be tricky for financial institutions, such as banks etc, mainly because of legal and technical issues. What is the solution then? We are approaching the time when online marketing is probably going to be a "MUST". Or even already is one? Does it mean that financial institutions should consider developing internal online marketing units which would be able to give special attention and concern to those legal aspects? It`s a good question because banking field is definitely not the one where online marketing campaigns can be implemented randomly by random employees...

Comment by Steve Lubetkin on November 7, 2009 at 8:04am: There are ways financial institutions can implement social media channels, and Wells Fargo provides a good model of how this might work. But most marketing people in banks remain stuck -- either through their own lack of knowledge or entrenched, old-school managements they must please -- in a marketing model that depends heavily on print ads showing beautiful, ethnically balanced groups of people standing around a desk with a computer and a checkbook, when the demographics clearly show that the audiences they need to convince to buy their financial services mostly don't read newspapers any more. We had Larry Cohen from SRIC research at the NJ Bank Marketing Association last December speaking about demographics and their implications for the financial services industry. The video podcast I produced from that event is available here on BankInnovation.net.

Comment by Rekha Vatsa on November 9, 2009 at 8:01am: yes, i definitely understand your point and agree. Thank you for sharing the video podcast!!

Comment by Rekha Vatsa on November 10, 2009 at 4:47am: I have another interesting study concerning this case. If interested please check out this link:

Banks struggle to bridge the gap between millennials and baby boomers

Comment by Jeff Hazel on November 11, 2009 at 5:08pm: Social media is one of several new ways that Millennial customers like to interact with banks and other businesses. A kindred trend, of particular importance in the customer care arena, is the rising use of automated self-service, including Web chat, e-mail, Web self-service, and interactive voice response (IVR) systems.

Recent proprietary research by Convergys shows that Millennials are 43 percent more likely to use such automated, technology-enabled channels for customer service versus speaking with an agent.

Success in the current or in any economic environment hinges on effective relationship management: delivering the superior service experience customers expect, balanced with the cost of providing that care. Because automation costs less than traditional methods – and is the interaction vehicle preferred by Millennials – the move to self-care is smart business for banks that seek to win and keep next generation customers.

You can find out more about the Convergys study and its findings by going to http://www.convergys.com/vision/rm-insights/research/downloads.php

Jeff Hazel

Comment by JJ Hornblass on November 11, 2009 at 6:20pm: Jeff, thanks for your post. I looked over that customer-experience white paper, and, boy, that had a shocker of a data point. The report says consumers were asked, did you bad experience with a company, not report it and stop doing business with the company? It looks like 75% of those who switched banks did so silently. That was well higher than every other industry, including cell phone providers, not historically the best at providing strong customer service. Amazing.

But to your comment, I wonder about automated customer service vs. customer service via social media. It seems to me that the whole driver surrounding customer service via social media is that it fosters a sense that the company "knows" the customer. I know your survey found Millennials like automated customer service, but I wish they were asked about social media customer service, too (I didn't see that question posed).

Comment by Jeffry Pilcher on November 13, 2009 at 1:00pm: I believe forums — not blogs — are the most effective (and the oldest) way for consumers to pose questions to companies and each other. They are so old, they pre-date the internet. And yet no one ever seems to talk about them... Why is that?

Comment by Jeffry Pilcher on November 13, 2009 at 1:04pm: Steve, that article on the NJ Banker's association is ridiculous. Listening to what people say about you online is NOT a pitfall of social media. Horrible reporting that reflects the author's lack of understanding about what social media and how it works. If the reporter left the event with that much confusion, then it's no wonder bankers aren't sure about the role of social media.

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