Why does social media matter for financial services?
Financial service providers (FSPs) have been slower to take advantage of social media than providers in many other industries. There are a number of reasons behind this, from regulations governing customer data, to other less articulated barriers rooted in the ways in which FSPs have typically interacted with their customers.
But social media shouldn’t be ignored – it offers a number of solutions to some of the problems facing FSPs now, from the difficulties of rebranding in response to bottomed-out consumer trust, to the challenge of staying relevant as disruptive services like peer to peer lending and midata have their moment.
Let’s have a quick look at some of the ways in which social media can help FSPs:
Whether fair or not, FSPs traditionally have an image as members of the Establishment with a capital E, and as authority figures more generally. The financial service provider used to be seen as the expert: that’s why customers used them. This unequal relationship may have worked well in the past – but last decade’s financial crisis destroyed trust in opaque and distant-seeming businesses and their practices, and an image refresh is still badly needed for the whole financial service sector.
This is perhaps one of the reasons for the success of services like peer to peer lending and midata which are all about empowering the consumer and levelling the playing field between consumer and FSPs. These services are yet to peak in terms of usage, but their success so far and the hype surrounding them hint that there is an appetite for a reimagined consumer role when it comes to finances.
Social media offers a chance to redress the balance. It breaks down the traditional provider / customer barriers and enables a dialogue on equal footing – the perfect way for FSPs to show customers they’re on their level. Branded communications shouldn’t all be about talking down to the customer through advertising – talking with the customer is important too.
Mass Market Appeal
Many FSPs are mass market by nature – meaning it can be difficult to appeal equally to all relevant demographics. The opportunity provided by social media to have individual conversations with customers means that more flexible branding is possible – brand identity isn’t rooted in the branch experience, or in a quarterly ad campaign, but is flexible to the needs of the consumer.
This approach isn’t just effective on an individual basis either; crucially all these conversations happen in the public eye, meaning that new and existing customers can bear witness to the fact that a “tailored customer approach” isn’t just a marketing gimmick – even if they’re not the ones being communicated with directly.
Other options are available
The rise in FinTech startups shifts the balance in another way too. In the past, the financial sector could reasonably assume continued usage because of a lack of convenient alternatives. But an increase in alternative financing options means traditional FSPs can’t rest easily on their laurels.
Disruptive new services are keen to define themselves in opposition to old-fashioned and opaque seeming incumbents, meaning it’s a dangerous thing to live up to stereotype. A social media strategy is part of showing customers that FSPs are moving with the times.
Taking a risk and doing something different can pay off – as in the case of ASB Bank in New Zealand, who in 2013 launched their Like Loan Facebook competition in an effort to generate leads for home loans. Users entered the competition by liking the ASB loan rate featured on Facebook – and as more likes were received, the loan rate dropped. Once a week, one entrant won the loan rate featured at the time of the draw.
Overall, the campaign generated over 21,000 entries and around 18,000 leads – the majority of which were non-existing customers. These resulted in 229 conversions to home loans - approximately $4.5m in revenue, according to ASB.
This is a great example of generating mass-market engagement through social media – and one which proves that the benefits offered by social media aren’t always intangible.
An effective social media strategy is, arguably, essential. However, it isn’t the answer to everything. It’s the external face of how great with customers your company is, but not a replacement for being great with customers on other fronts. For example, a recent study found that UK 18-34 year olds aren’t always militantly pro-social media: in general, they’d rather talk to an insurance service provider by email, phone or face-to-face rather than through social media.
Dr Paul Redmond, who advised the study, said: “While maybe surprising to insurers, these results confirm much of what we’re discovering about millennials and the way that they behave. They don’t see themselves as digitally savvy because for them digital and social tools are a given, and it’s clear that a strong bias exists for wanting to deal with actual people.”
In other words, social media can be an effective tool to gain back customer trust, appeal to diverse customer bases and mitigate against unflattering comparisons to alternative financing services – but customers (rightly) expect great customer service on every front now, whether that’s via email, phone or app, in branch or on social media. An effective customer service approach needs to incorporate social media alongside all these other things – and is still a great way to differentiate, especially for larger traditional FSPs who can still exploit their reach in a way that many start-ups can’t.