Banks must do more to embrace social media says study

Banks must do more to use tools like Twitter

Financial institutions are still not using social media to its full potential and are missing out as a result, according to a new report by German IT firm GFT.

At present, there are approximately 1.5 billion users of social networks worldwide. While many financial services firms do have a social media presence, the GFT study, Impact of Social Media on the Financial Services Sector, argues that most firms are still concentrating on one-way social marketing activities, rather than truly integrating social media into customer relationship management.

“The moment has now come to go one step further and achieve true direct interaction through social media channels,” said Christopher Ortiz, head of GFT UK. “Social media will not be a true opportunity for banks until they can share in the customer’s experience, understand and anticipate the customer’s needs and respond quickly and effectively to those needs.”

Social media channels and strategies differ between institutions. Some stock exchanges, such as NYSE Euronext, have well-developed Facebook pages. Others such as the London Stock Exchange are entirely absent from Facebook, but more active on twitter. The GFT document insists that financial institutions need to do more to beef up their social media presence and make it more interactive for customers.

Already, peer-to-peer loans, micropayments and banking communities have advanced, partly due to social media technology. GFT sees an opportunity to combine the communication channels provided by tools like Facebook, twitter and LinkedIn with the huge quantities of data that can be extracted on customers, so that banks can use the information to provide better products and services to clients.

“Taking advantage of the use of social media and its convergence with other factors, such as mobility via smartphones, is vital for banks to be able to accompany their customers at all times and, wherever they might be, to be able to offer services that are best suited to their needs or a fast response to any problem that might arise,” stated the GFT document.

The GFT warning is far from the first of its kind. Earlier this year, a report by consultancy Ctrl-Shift argued that banks must learn to use information services to provide value to their customers, or face the prospect of disintermediation by newer, quicker firms.

The Ctrl-Shift report, entitled ‘What are banks for? Customer loyalty in retail banking’, suggested that the rise of social media, mobile technology and the internet will combine with the UK Payments Council’s introduction of account switching in September 2013 to force banks away from traditional ‘push’ business models towards a more customer-centric ‘pull’ model. That means using information about customers to tailor products more directly to their needs, rather than simply developing a product and hoping consumers will use it.

The prospect of disintermediation of existing financial services firms were already being widely debated at the financial services conference Sibos in Amsterdam in 2010, but the concept can be traced back much further; author, entrepreneur and financial services blogger Sean Park was commenting on the potential of newer online firms such as Amazon and eBay to disintermediate financial institutions as far back as 2006.

GFT Group is based in Germany and focuses on supplying IT services to financial services companies.