18 February 2010

London – UK traditional banks need to recognise the value of social media if they are to keep their grip on customers in the thawing economic climate according to Datamonitor.  The independent market analyst believes the rise of social media has facilitated a fundamental shift in power from banks to consumers.  The research* reveals how UK consumers are leading the way, as 50% are using a variety of online tools to make their financial decision compared to 41% globally.  According to the Datamonitor findings, ‘online media’ is most popular amongst the 25-34 year old segment in all regions except APAC (Australia, Singapore and Japan).

The Banking industry has been slow to catch on to the social media trend

Financial Services providers as a whole have been slow to recognise the necessity of communicating with their customers through online channels.

Author of the report, Anna Large, said: “Banks have adopted a “bury-their-heads –in-the-sand approach to the part social media could play in both retaining and obtaining customers. At the heart of this is the idea that social media is just a fad, that consumers are essentially non-committal. However, the fact that 50% of UK consumers are using online tools to make their financial decisions indicates that banks need to start appreciating the power of sites such as Twitter and Facebook.”

Social media is no longer the reserve of the younger generation.

The banking industry has held onto the belief that social media is the domain of teenagers and university students. Although Facebook may have started out in elite colleges and universities, the scope of the networks have developed and changed in just the last 12 months.

Networks are no longer used just for friendship purposes. Sites like Twitter have developed to become a powerful marketing tool, utilized by many multi-national companies. Sites such as Linkedin have also become an important place to network for business purposes.

Anna Large commented: “Consumers are now viewing social networking sites in a far more serious manner. They are no longer a way of passing the day chatting to friends, but instead people are swapping important information with a new anonymous network, publishing work, reading product reviews, political blogs etc.”

Social media is more useful as a customer service tool than a sales tool

Another factor in banks failing to enter social media is the idea that the medium is unable to directly boost profitability. In reality social media does have the scope to drive sales, but providers have not seen a direct or measurable link.

Whilst social media can be used to build awareness of brands, its real value comes through other, softer factors which build consumer trust and brand loyalty.

Ms Large said: “Simply using social media in itself will sweeten consumers by showing them that banks are coming to them and communicating through their preferred channel.”

Ultimately creating a sense of community, promoting transparency, and providing real time and high quality customer service will lead to customer recommendations, and the potential of viral marketing in generating sales from others is limitless. 

Datamonitor believes that even if a provider does have a visible presence on a site, the value of the information put out there is of the utmost value in terms of product research, sizing up the competition and understanding what consumers want.

Banks must not dive in to social media without building a cohesive strategy

Although it is essential that the banking industry sees the potential of social media, they must take a considered approach. 

Ms Large warns: “Social media should be integrated into a holistic approach in which the effectiveness of existing marketing channels is not undermined.”

Social media can be very damaging if ignored by the banking industry

Banks have been under the assumption that as there is so much information being exchanged via social networks, its value is diluted. This has led many providers to believe that any negative comments made on social media sites pose little risk to their brand. 

Ms Large said: “Banks would be naïve to believe that consumers don’t listen to recommendations made online. ‘Word of finger’ has replaced ‘word of mouth’ so product recommendations and brand advocates are far more accessible. We don’t now just rely upon the say so of our friends and family; instead we want to know about other consumers’ experiences and are using digital networks to satisfy that need.”

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