It seems everyone is banking on social media. Whether it is investors pushing up valuations for shares in social media sites; financial institutions investing in new social platforms; or the launch and use of new social currencies, what is clear is that social media has gone from being seen as a disruptive technology to become a tool for innovation in financial services.
Throughout this article series, we have heard from banking insiders and executives who are not just integrating social media into their businesses – they are pioneering how it will be used in the future. The evidence can be found right across the globe. Some, like ICICIdirect in India, are investing in social media ‘games’ to drive customer loyalty and financial literacy. Others, such as GTBank in Nigeria, have launched social media banking applications allowing customers to complete a range of core banking functions through their Facebook account.
But it is not just emerging market banks or small start-ups looking for a competitive edge that are banking on social media (though, truth be told, many of the most notable innovations in this space are happening in the emerging markets). Traditional incumbents and global market leaders are also moving quickly to use social as a tool to reconnect with customers and rebuild trust with stakeholders (as evidenced by the innovative approaches articulated by RBS and ING in their articles within this series).
Somewhat ominously for banks, many of the fiercest competitors may not be from the ranks of their peers at all. Some of the biggest social media sites themselves are mooted to be considering providing their own financial applications, and many industry observers expect the technology Titans (Apple chief among them) to be eyeing the sector as well.
The truth is that – whether they like it or not – most bank executives and boards now recognize that the biggest question about social media is not whether or not to participate, but rather how it can best be applied and implemented to achieve the greatest benefits for the bank, its shareholders and its customers.
Certainly there is ample evidence that social media is already redefining the way banks interact with, sell to and serve their customers. Few banks today don’t, at the very least, have a Facebook page and Twitter account; most have likely already used some form of social media to support the sales cycle or gain a clearer understanding of the customer experience. Indeed, where banks are using social media, the vast majority are doing so in a way that allows them to reconnect with their customers and keep their ‘offline’ conversations alive.
Where things start to get competitive, however, is when banks start to think about how social can be integrated into their operations to improve service delivery, generate new ideas and drive employee engagement. Banks are crowdsourcing ideas from their employees and their customers; they are proactively using social feeds to warn of service interruptions at ATMs and branches; and they are using internal platforms to drive collaboration and innovation.
Clearly there are still some hurdles that social will need to clear before it becomes truly mainstream in the banking sector. Regulation is a big one; banks are concerned that – with little official guidance on the use of social coming from the regulators – their social activities might run afoul of future regulation or draw the scrutiny of customer protection authorities.
Some of these concerns are well founded. In April, the value of a Bitcoin plunged from US$260 to just US$130 before regaining some of its strength. At one point, a (now infamous) Bitcoin user paid 10,000 Bitcoins for two pizzas which – at US$260 per Bitcoin – must go down as the world’s most expensive fast food purchase (of course, the value of the Bitcoin was a mere one-quarter of one cent at the time of purchase).
Another ongoing challenge is banks’ instinctual desire to see everything in terms of ROI. The simple truth is that no bank has yet – with any degree of success – found a way to monetize social. Some have certainly shown success at using social to reduce operational costs and increase efficiencies within the enterprise but, to date, nobody has turned social into a sustainable revenue stream (not even Facebook it seems). Indeed, the move towards social will require bank executives and their shareholders to move beyond the traditional view of ROI in order to value the more intrinsic benefits that social can deliver.
Another key hurdle is related to technology. On one hand, banks are wary of investing in platforms that, frankly, didn’t even exist a decade ago and whose fortunes largely rise and fall on the whims of society in general. Banks are also struggling to achieve the type of ‘single customer view’ from their current IT systems in a way that would truly enable social to be integrated into banking operations.
Those banks that are investing in social are also quickly finding themselves facing a significant capability gap. From identifying the right leaders to run social media initiatives through to retaining social-savvy customer service representatives and marketing managers, many banks are struggling to develop, recruit and retain the right talent to help them make the most of the social media opportunity.
So what does the future hold for social media in the banking sector? Will branches disappear as customers flock to social media sites to do their banking and investing? Will BitCoins overcome the mighty greenback to become the de facto currency of global commerce? Will banking CEOs become Twitter superstars attracting millions of followers?
Likely not. The reality is that, over the long-term, social media will simply become enmeshed into the organizational fabric in much the same way that the telephone, the internet and email did before them. Each, in their time, was seen as disruptive, then innovative, then mainstream.
In the long-term, social media will be no different; it’s what happens in the meantime that will truly be exciting and may separate those banks with the innovation to survive from those that do not.
With this, the final article in the Social Banker v2.0 series, I would like to personally – and on behalf of KPMG – thank all of those that participated, either by contributing articles or by engaging in the lively debate that has surrounded many of our posts.
Within the next few weeks, subscribers to the series will receive a complimentary copy of these articles in a hardcopy report. If you are interested in receiving a copy, please take a moment to subscribe, or contact your local KPMG member firm.
We hope that, through the series, we have provided banks, regulators, technology firms and customers with some interesting insights and ideas for using social media in the banking sector. We look forward – with much anticipation – to seeing how the market progresses.
By Vincent Piron, KPMG in Belgium