Role of Social Media in Growing Bank Revenues

Guest Blog Post by:  EMI Strategic Marketing

At last month’s Financial Services Marketing Symposium, a question posted by Tim Spence of Oliver Wyman to kick off the conference reflected an issue on attendees’ minds: where does the financial services industry find revenue growth? This is top of mind in the industry, as the lower loan-loss provisions, which boosted bank profitability in 2011, are expected to tail off in 2012, so financial institutions are now looking to the revenue side of the ledger to maintain and grow profits.

According to the top 25 banks’ recent forecasts, all 25 plan to increase revenue by growing their market share – which means that some of these institutions will fail do to so.

In an environment characterized by increased competitive intensity, technological advances and renewed focus on customer relationship optimization, banks are investing in a range of new service and sales channels, with social media prominent among these emerging channels. A survey of the FSM conference audience revealed that 67% of attendees’ banks have a presence on Twitter, Facebook and LinkedIn. A recent report by FIS Global shows that many top banks have a social media presence on these three main social media platforms:

What was notable about the social media discourse at the conference is that none of the speakers explained how participation in social media channels improves revenue for their organization:

» Paul Kadin of Citibank focused on the fact that Citibank’s social media presence has helped to improve its Net Promoter Scores

» Julie Berkun Fajgenbaum of American Express OPEN discussed the organization’s social media goal: active participation by message recipients

» Tim Collins of Wells Fargo emphasized that social media is not the right channel for pushing products; rather, it is a forum for authentic, relevant messages to customers

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Quick Tips for Enganging With Credit Card Customers Online

Currently, 39% of customers who use social media for credit card purposes report discussing their experience—both positive and negative experiences (22% and 12%, respectively)—or informing their financial institution about a customer service issue (16%). Credit card customers are more likely to use social media to a share an experience or post a customer service issue than do retail banking customers.

The following graph shows which card issuer customers are most willing to read and share their experiences through social media in the future.

  • The top two issuers whose customers have the most interest in using social media as a service platform don’t offer any links to these services on their home page
  • Among the 10 issuers included in the study, only three have social media links on their website
 Source: J.D. Power and Associates 2011 Credit Card Satisfaction Study

Here are a few tips to help maximize the social media experience with credit card customers:

Let Them Find You – Issuers with customers who have an interest in communicating through social media should include links to their home pages. This is a growth opportunity for issuers to interact with and satisfy their customers on yet another subset of the online platform.  Make it easy for customers to find you and interact with you.

Prepare to Engage – Issuers should be mindful that once a customer is engaged or receives a response via social media, they cannot control where the conversation goes. Issuers should therefore be prepared for any situation and realize that customers could take the conversation in a completely different direction than what might have been intended.

It’s a Two-Way Street – Issuers should be wary about trying to influence or change a customer’s opinion. Social media is a tool that allows for two-way conversations, and may result in the customer and issuer agreeing to disagree.

Be Real – Honesty, transparency, and accountability are critical in the social media space; however, being in a highly regulated industry, issuers need to find a balance between this and the constraints of imposed regulations.  Be aware of what they are, but don’t allow them to limit or prevent dialogue and responses.

Talk and Tell – Don’t just sell.  Social media should not be used solely as a sales tool

 

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What Will 2012 Bring for the Banking Industry?

Original post by Banking.com Staff on December 21, 2011

As we wrap up 2011 and head into the New Year, we asked some of our readers to share their thoughts on the banking industry in 2012. This past year has been filled with mobile and tablet innovation, but will that carry on in 2012? How will social media impact financial institutions in the next year? Here’s what the experts are saying:

  • “Of those banks that are currently using social media as a channel to communicate with their customers, much of the focus has been on appealing to Gen X and Gen Y customers,” says Karen Licker, Financial Consultant & Social Banker (Independent) for J.D. Power and Associates. “Clearly Gen X and Gen Y customers comprise the majority of those subscribing to and using social media, but the number of Pre-Boomers and Boomers who do so as well is growing at a considerable rate. In addition, Based on J.D. Power’s 2011 Retail Satisfaction Survey, nearly one in five Gen X and Gen Y customers state that they are likely to utilize social media for banking-related topics in the future, and more than one in 10 Pre-Boomer and Boomer customers are likely to do the same. Banks should be prepared to interact with and satisfy the growing Pre-Boomer and Boomer customers too!”

© 2011 J.D. Power and Associates Retail Banking Satisfaction Study, The McGraw-Hill Companies, Inc. All Rights Reserved.
  • “2012 will finally see the tipping point for mobile banking. Mobile moves beyond today’s limited functionality and starts to become the primary remote customer channel. Look for some interesting corporate bedfellows to emerge as the financial services ecosystem starts validating mobile payment business models and the importance of controlling new methods of money transfers and payments. We will see continued disruption in the space, as it relates to payments, security protocols, features like proximity rewards, integrated p2p and a2a with social tether, account opening, and more. Expect feature rich device agnostic applications that enhance usability and user experience across a range of mobile and tablet devices.” Bradley G. Leimer, Vice President, Online and Mobile Strategy at Mechanics Bank (@leimer)
  • “2012 will be the year of improved customer lifecycle management. With the fees and interest margins associated with accounts falling, there is a need to acquire a new customer more efficiently, onboard each new customer more effectively, achieve a higher level of relationship engagement and gain a greater share of wallet. Financial organizations will also need to focus more resources on retaining current clients since replacing these households has become so expensive.” Jim Marous, Senior Director, Marketing Services, Harland Clarke (@JimMarous)
  • “In the credit card space, service alerts have steadily grown in importance over the last few years,” says Michael Beird, Director of Banking Services for J.D. Power and Associates. “Based on J.D. Power’s 2011 Credit Card Satisfaction Study, cardholder satisfaction increases by 98 index points (on a 1,000-point scale) when service alerts are offered and used. Email (80%) is the most common form of service alert, and is followed by phone calls (23%); text messages (15%); and secure online messages (8%). Interestingly, secure online messaging is the lowest-used service alert feature, but it results in the highest satisfaction (783). While issuers still have to do a better job of informing their customers about the availability of the service, it’s clear that customers are seeking ongoing and proactive communication from their banks. Informing customers of status issues and concerns in real time, via text, email or secure online, is an emerging service that will likely grow exponentially in the year ahead.”

© 2011 J.D. Power and Associates Credit Card Satisfaction Study, The McGraw-Hill Companies, Inc. All Rights Reserved.

What do you think 2012 will bring for the banking and financial services industries? Leave us a comment below or Tweet @bankingdotcom or @JDPowerBanking.

Banking.com is blog is run by Intuit Financial Services, and provides access to insights from industry experts as well as resources for tapping into important customer segments.  Visit their homepage at www.banking2020.com or on Twitter at @bankingdotcom.

 

 

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Should Banks Even Bother Using Social Media?

The short answer is yes, according to a recent J.D. Power special report, Achieving Excellence in Customer Service: The Brands That Deliver What U.S. Consumers Want. In fact, additional analysis conducted by J.D. Power’s social media intelligence team indicates that customers do talk extensively about people and bank processes and ignoring customer feedback represents the largest missed opportunity for banks, especially those trying to build and sustain a customer centric culture in an overregulated industry.

Most customer banking discussions on social media channels can be grouped into the following three areas:

  1. Passive positive discussion around usage and services
  2. Passionate negative discussion regarding stability, performance
  3. Avoidance of larger banks that have suffered as a result of the financial crisis

© 2011 J.D. Power and Associates Retail Banking Study, The McGraw-Hill Companies, Inc. All Rights Reserved. Values may be affected due to rounding. Pre-Boomers” = born 1900-1945. “Boomers” = born 1946-1964. “Generation X” = born 1965-1976. “Generation Y” = born 1977 through 1994

What Are Banking Customers Using Social Media For?

  • 49% report using social media outlets to read and discuss general banking and industry news and events
  • A small proportion of customers (13%) have used a social media outlet to contact their financial institution for a service-related issue
  • Of those blogging about a poor service experience, only 24% of Gen X and Gen Y customers and 16% of Pre-Boomer and Boomer customers say their financial institution actually responded to their issue
  • While the majority of customers received no answer, a large percent of the population stated that they didn’t know if they got any response

The Good News: Most conversations are transactional in nature

The positive customer behaviors exhibited in social media conversations are primarily transactional in nature with less engaged interactions. For instance, customers passively mention using an ATM and rarely mention wanting to join a bank as a result of a positive experience or message. Some negative behaviors like “avoid” largely reference customers that “avoid bank fees” while many others such as “not trust”, “take out” and “reject” reference conversations whereby people are encouraging traditional bank customers to cancel their accounts with major banks.

The Bad News: The cost of a non-response can be high for banks

  • Among those customers who received a response, 47% say that they “definitely will” reuse their financial institution in the future and declines to 27% among those customers who did not receive a response
  • Among customers who received a response, 50% say that they “definitely will” recommend their bank vs. 30% of those who didn’t receive a response, and 44% say that they “definitely will not” switch vs. 25%, for those not receiving a response
  • Nearly one in five Gen X and Gen Y customers state that they are likely to utilize social media for banking-related topics in the future, and more than one in 10 Pre-Boomer and Boomer customers are likely to do the same

The Point: Banks need to invest in servicing their customers through social media

Although the use of social media for customers to interact with their financial institution is still a bit new for some, examples of what to do and what not to do have already been witnessed across several industries. Banks that have responded to Twitter postings without considering the consequences of such actions suddenly became inundated with many requests via that channel, and found themselves under-equipped to handle the influx. The snowball effect this created had negative consequences for these companies, which found it necessary to quickly staff up to handle the volume of new Tweets they were receiving.

While simply having a Facebook page or Twitter account may have been sufficient for financial institutions in the past, customers are now beginning to utilize these channels to contact their bank. Given the public nature of these contacts, banks need to be equipped to respond quickly to questions or issues raised via these channels, while also keeping in mind the sensitive nature and regulations regarding communication for the financial services industry.

The usage of social media outlets to contact financial institutions is growing, and is likely to increase in the coming years. Of customers who say that they have used some form of social media outlet to contact their financial institution, a vast majority either did not receive a response or are not sure if they received a response.

Banks must better equip to handle what is likely to become an increasingly popular—and very public—form of contact.  Banks also need to have appropriate staff to quickly answer questions or respond to service issues if they care about growing a customer centric culture and want to keep customers happy.

 

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Beyond the Wall: Ideas for Financial Facebook Welcome Pages

“Most visitors to a bank or credit union page on Facebook are greeted by the all-too-familiar Wall — a series of updates, comments, feedback and exchanges that can frequently lean to the dark side. But there’s another, arguably better option” writes Jeffry Pilcher, Publisher of The Financial Brand.com.  “When opting for a customized Welcome page over the standard Wall posts, you’ll have a wider range of visual tools at your disposal, making it easier to create more retail excitement.”

To create a more dynamic and thoughtful experience for visitors while getting them to focus on the topics you choose, Pilcher showcases specific examples of financial Facebook Welcome pages and offers the following ideas:

1.  Hi There….Please Like Us Banner Ads – Many Banks & Credit Unions

Used by many institutions, custom banner ads on Welcome pages encourage visitors to hit the Like button, and often include offers, news, job postings and other promotions.  “This approach isn’t terribly creative, but it’s better than visitors getting overwhelmed by a bunch of random Wall posts” Pilcher explains.

2.  Link, Like, Love – American Express

The AmEx Facebook page includes an ad with the ability to earn instant rebates after linking your credit card to the rebate application.  Users can choose from hundreds of familiar brands and earn cash back on purchases.

3.  Nonsense Feedback – Ally Bank

Ally Bank reserves a dedicated “Tell us about it” area that encourages bank customers to rant about their frustrations with general banking issues.  The Like button reads “if you dislike banking nonsense, “Like” Ally Bank.  Pilcher notes that “this is a good approach to stimulating engagement and dialogue with Facebook visitors, and Ally deserves credit for integrating a consistent marketing message across multiple channels.”

4.  Money Personality Test – Citizens Bank

Citizens encourages Facebook visitors to complete a brief “Money Personality Test” resulting in the user finding out what kind of saver they are.  “It’s moderately interesting” says Pilcher, “But once you’ve taken the test, there is not further call-to action.”

5.  Rotating Ad – UBank

“UBank is trying to create a more navigable experience – one that’s clearly focused on their branded tools and products” notes Pilcher.  UBank makes use of a rotating banner ad where they promote products, tips, solicit feedback and include social networking links.

Source:  The Financial Brand.  Read the full post and view all examples

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