European banks have consistently been far more nervous than their American counterparts about selling their products and services over social media but failure to do so is leaving both consumers and the institutions out of pocket.
According to Ovum, Asia-Pacific and American retail banks are “spearheading approaches” to social media engagement – reflected in news earlier this year of new proposals from US regulators to help banks manage social media.
American Chase recently topped the Power 100 list, which ranked the social media activity for the top 100 banks and credit unions around the world. The methodology analysed Facebook ‘Likes,’ Facebook engagement rate, Twitter followers, tweets sent, YouTube views and YouTube subscribers and saw Chase receive a power score of 2,621, followed by fellow US bank Capital One (2,364) and India’s ICICI Bank (1,763).
European banks, however, are lagging far behind to the detriment of improved sales and customer engagement; although Ovum said it expects this to change significantly in the next three years as social media becomes a significant channel for retail banks.
So how should banks first approach a social media strategy? According to the analyst firm, they must begin to fully integrate social media channels such as Twitter and Facebook into their customer communications strategies before moving beyond simply using social to broadcast to customers and manager their reputations to engage customers.
As the economic environment is improving and the demand for financial services is increasing, banks must focus on enhancing customer experience, which will translate into increased sales and more effective servicing, said Ovum.
Jaroslaw Knapik, senior analyst within Ovum's Financial Services Technology practice, commented: “Customer needs are changing – this fact is uncontestable. It is now almost impossible to ignore social media. It transcends geographic boundaries, encouraging interaction and collaboration among disparate users united by a common cause, belief, issue, or interest. It provides a powerful marketing platform for understanding and engaging with customers, allowing banks to improve sales and profitability.”
He continued: “European banks in particular find themselves at the back of an underperforming class when it comes to social media engagement, voicing concerns over data security, ensuring data privacy, as well as the potential reputational damage that can come from a mismanaged communication.”
Helen Thomas from GFT UK also recently wrote of financial institutions’ reluctance to engage customers over social media.
She said: “Instead of engaging with customers directly, they have used social media to send out newsletters, offers and gather information. Yes, this works – but it should be a two-lane highway.
“Banks which opt to bury their heads in the sand, when it comes to the interactive social media phenomena, will find their marketing activities flop by the wayside.”