In the previous instalment, we postulated that the possible reasons why banks have been tentative about embracing social media include security concerns, self-centred business models and the desire not to rock the banker-customer relationship boat. In this column, we look into some of the factors that make social media worthy of the banking sector’s attention.
A burgeoning online market The Internet has grown from 70 million users in 1997 to over 2,2 billion, by all means a veritable market in which banks can — and should — play. According to Daniel Gulati, a Harvard Business Review contributor, entrepreneurial companies with technology at their core have disrupted entire industries and threatened or eliminated incumbents, so banks must seek to protect their financial services turf.
Declining price of Internet connectivity Technology Zimbabwe recently noted that the continued decline in the price of Internet connectivity could result in “some creative new packages for low-income earners” enabling “previously excluded groups of people” to have access to the Internet and social media. The development of appropriate technological infrastructure is expected to smoothen the way for banks to push their Internet banking products and encourage them to realise the potential of social media. Gulati also contends that the falling cost of computing will propel overseas markets and entirely new customer sets into relevance, which may be of interest to the banking sector.
The attempt to convert digital influence into business value Technology watchers take note of the race to develop a system that will reward those who wield the most social influence as measured by platforms such as Klout and the attempt to convert such digital influence into business value. Additionally, more traditional businesses are being run on software and a larger component of a companies’ customer experience is being delivered online, so most players — retail bankers included — are bound to take notice and try to find ways to engage. At this rate, it may not be long before we have titles such as head social media and digital communications in local banks.
Cost savings Imagine the amount of time, effort and money banks would save by simply tapping into social media for their customer preference surveys and recruitment activities, normally outsourced to research and recruitment companies respectively. Recently, the tech-savvy group CEO of a listed Zimbabwean financial services group personally said he was looking for an experienced corporate banker with more than 10 years’ experience to start work in Zimbabwe immediately. His medium of communication? If you said LinkedIn, you guessed right. Gulati warns that HR professionals who fail to harness the power of social media such as LinkedIn may miss out on attracting star candidates.
Leveraging existing internal social network capacity Some banks already have internal social networking platforms or “discussion forums” through which employees can comment on ongoing corporate communications, giving them valuable practical experience in handling business communications through social media. On paper, transforming these private networks into “public” platforms on which clients can also partake shouldn’t be too difficult an exercise, security concerns notwithstanding. After all, banks already trust employees to talk to thousands of customers in person or over the phone every day, so why not open up another channel of communication through social media?
Cultivating a sense of engagement Social media can engender a sense of engagement by allowing customers to have a say in not only the creation, but consumption of value through participation in product development, in an era in which, according to Nilofer Merchant, the value chain has changed and the customer is no longer just the “buyer”, but also the creator. Where usage used to come last, at the end of the marketing process, it is now more frequently starting the cycle.
Meeting evolving customer demands Contemporary customers are spoilt for choice and some argue that they have been spoiled by the superior delivery of services from providers outside the financial industry. We used to go to the movie house to watch movies, now we just enjoy DVDs in the comfort of our homes. We used to go to the travel agent to buy air tickets, now we buy them online. Resultantly, customers are pressuring financial institutions to improve product and service delivery and provide a seamless experience across channels.
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As banks consider embracing social media, they will have to contend with regulatory concerns to do with identity management in the context of anti-money laundering considerations. To sum up the imperative for social media in modern banking, I quote from Soumitra Dutta’s Harvard Business Review article titled What’s Your Personal Social Media Strategy? which I urge anyone who is unsure about how they should engage with social media to have a look at. “Today’s leaders must embrace social media for three reasons. First, they provide a low-cost platform on which to build your personal brand, communicate who you are both within and outside your company. Second, they allow you to engage rapidly and simultaneously with peers, employees, customers, and the broader public, especially younger generations, in the same transparent and direct way they expect from everyone in their lives.
“Third, they give you an opportunity to learn from instant information and unvarnished feedback.”
Omen N Muza writes in his personal capacity. He is a banker and managing director of TFC Capital (Zimbabwe) (Pvt) Ltd, a Harare-based financial advisory company with interests in banking and agriculture as well as the convergence area between them.
