Ways social channels have slipped into financial services
In all the excitement about Fintech, blockchain and newer disruptions, it is easy to dismiss the growing impact of social channels in finance. The immediacy and associated ‘bubble’ tendencies have both been discussed at length in response to recent world events including Brexit and the US presidential elections. However, lesser attention has been given to the relentless way in which social media changes customer (and employee) sentiment and preferences. Here are some of my favourite examples of how financial services players have integrated social into their business:
Banks have been using social channels to help them provide banking services. Back in 2012, DenizBank, in Turkey, was the first bank in the world to offer ‘banking via Facebook’. Bank customers on Facebook could use the social media site to monitor their balance and transfer funds. Other banks have since adopted Facebook as a way to check customer credentials: ICICI bank, for example, has a mobile banking app that piggybacks on customers’ Facebook login details.
Service providers are also using social media to respond rapidly to customer complaints and questions. A complaint missed on social media can go viral very quickly, so it pays for providers to be alert and respond rapidly to any questions. A comparison found that the quickest response to a question posted via Twitter was 3 minutes. The slowest was just over one hour.
Financial service providers use social channels to track reactions to their products. Banks with the most successful mobile banking apps achieve this popularity by tracking everything, from online reviews to feedback on social media. They then use this information to review and revise those apps to address problems, focusing hard on customer and user experience at all times.
Social media could also be a source of huge amounts of data. With a few exceptions — such as DBS in Singapore — most banks have not really got to grips with the potential for big data to change banking. So it may be somewhat premature to point out that social media could provide a source of massive amounts of behavioural and reputational customer data. But once banks do sort out their analytics, social media will come into its own as a data source.
Lenders are using social media as part of credit checking applications. New financial technology firms are using Facebook and Twitter (with applicants’ permission) as a way to gauge creditworthiness. This gives applicants with little or no credit history a chance to demonstrate that they are reliable and likely to pay back loans. Of course there are privacy concerns, but so far, the evidence is that social media use is opening up the credit market to more customers.
Marketing and communications
Driven in part by competition from online financial services providers, social media marketing has become a key part of banks’ marketing mix. Lenders in particular, such as Lending Club, Prosper, and Kabbage, have grown rapidly through clever use of social media marketing. American Express has also invested in linking with existing clients across social media to provide offers.
Social media data can be used to predict economic trends with reasonable accuracy. Twitter, in particular, is useful for forecasting economic trends. For example, a study by the European Central Bank found that tweets containing the word ‘bullish’ indicated that stock market prices would rise the next day, although the effect was often short-lived. Geolocated tweets from Spain have been used to create an accurate picture of regional unemployment. This holds potential for real-time predictions of trends.
Anonymised social media data has been used to analyse real-time reactions to advertisements. Mastercard has an arrangement with Facebook to access real-time data to assess reaction to its social media advertising. Early reports suggest that it was able to discover the effect of one simple change (adding a red carpet to a black-and-white ad) very rapidly, and increase interaction by around 30%.
Social media can be used to create and provide new business models. For example, in China, customers can use social media apps to bank, make payments, including paying their rent, and buy mutual funds. The scale of business model innovation is unprecedented, and the trend is spreading fast, globally.
Employer branding and recruitment
Deutsche Bank recently started a scheme to use social media information to identify students who might be suitable recruits, but who had not planned to attend recruitment events at universities. This enabled the bank to contact several hundred students who would not otherwise have been in touch, many of whom eventually went through the recruitment process.
Are you in financial services and using social channels to create a bigger impact? I’d love to hear from you. I will also be addressing the E2W community on just how far we expect social channels to impact financial services. You can register here for this technology in finance team talk.