Neil Jones, Consultancy Partner for TCS

The rapid uptake of social media has changed the way that customers interact with one another as well as with businesses. Customers remain the end users, but platforms provided by social media mean that the customer’s role has evolved and expanded to include reviewer, idea generator and advisor.

Traditionally financial services companies have been slow to implement customer engagement strategies compared to other industries. This is in part because prior to recent regulations, banks have not had to worry about customer retention as changing banks was much more difficult – something that is fairly unique to the industry.

The generation that is most strongly associated with the uptake of social media is Generation Y, which already makes up 50 percent of mobile banking users. Generation Y expects social media to be part of the customer service strategy and in the not-so-distant future, financial advisors will need to interact very differently with their customers and implement significant changes in their digital strategies in order to succeed. For example, customers would often receive scripted, flat and uninterested responses from banks, but now the social customer expects fluid and personalised interaction.

With new providers making in-roads into the financial services territory – like P2P lending, digital payments and insurance telematics – and e-tailers that are already familiar with customer analytics looking to take market share, it is increasingly important for financial services companies and advisors to address the obstacles that are preventing them from implementing a successful digital strategy.

Different financial sectors are facing different challenges but a key obstacle for the banking sector is that traditionally, service delivery systems are siloed around product offerings; therefore banks’ understanding of their customers has been incomplete. The result of siloed ownership is that only 42 percent of enterprises view their organisational structure for social media activities as effective.

However, most banks now are doing some level of social listening and customer support through mainstream platforms such as Facebook and Twitter as well as adopting new methods of engaging customers. For example, Nationwide is using social media to allow customers to influence key decisions. Its customers can vote on what charities Nationwide donates to every month and the bank provides vouchers as a way of thanking its customers for their engagement. As a result, Nationwide has strengthened its customer relationship.

Another challenge that the financial industries have is managing data. Banks need to use data, both structured and unstructured, to build up a much more complete and useful picture of the customer. It is essential to understanding and defining a relevant and engaging social strategy. However, there is polarity in spending on Big Data, with a minority of companies spending massive amounts and a larger number spending very little. As a result, we are seeing a few industry pioneers leading the way. For example, Movenbank has been using a social wellness score in conjunction with the standard credit rating to determine credit worthiness. This is a good example of an organisation using social data that is available to them in an innovative and unique way. The data provides viable insights into a customer’s background, and is used to build a more complete picture of the individual.

The rapidly changing environment of the social media landscape has also proved to be challenging as there is no one size fits all solutions for financial companies. We are starting to see some successful examples of organisations creating and facilitating an innovative culture and using crowdsourcing enhance their products and offerings. For example, Barclaycard a product called Barclaycard Ring, which is a crowdsourced community pioneered credit card. The ‘crowd’ is made up of the users of the card and they can make decisions about the product itself and benefit directly from the profits of the organisation. This is a strong example of an organisation embracing the new roles that social media has provided the customer, allowing them to influence and make decisions.

In this digital age, financial services organisations consider a combination of social, mobile, cloud and big data to be key to implementing a social strategy. However, if used incorrectly, it can seem like technology looking for a purpose, rather than technology solving a problem. It is important that banks define what they want to achieve from social media before they start to introduce solutions.

There can be no doubt that the connected customer will continue to provide momentum for change so it is vital that financial advisors focus on becoming more engaging, agile, insight driven, innovative and collaborative in order to meet the developing needs of customers and partners, now and in the future.