By Mohua Sengupta, Senior Vice President & Head – Banking Financial Services & Insurance and Sujeeth Samrat, Retail Banking Solutions Lead at ITC Infotech

Social Banking isn’t simply a matter of just deploying or activating some social tools. It’s a long-term strategic approach to shaping a business culture dependent upon executive leadership and effective corporate strategy, including business processes, risk  management and leadership development.

Retail banks have begun their journey of adapting to the social business model and are at different levels of maturity and success. While many have been using it as a channel to listen to the conversations, there have been only a few who have been able to glen actionable market insights for devising customer centric marketing strategies.  An even smaller subset of those has been able to integrate it into their day to day operations.

Evolution of the digital customer

Adaption of digital technology is happening at a fast pace, what took television and the internet a few years to reach an estimated user base of 50 million users , took a few months for the social channels to accomplish.

Rapid expansion in ownership of smartphones and tablet devices is making today’s customer want to research financial services on demand. This is truly adjusting the financial services purchase funnel, the way people conduct daily banking, and the interaction between channels.

Digitally enabled customers today demand banking services at their convenience and in a mode that best suits their lifestyle.  Full fledged banking through Social Media (Social Banking) is what they desire.  Gen Y customers would not even want to have to log into Internet Banking, not to speak of walking into a branch.  They want the bank to be available while they are engaged in their social networking

Tackling the challenges

Banks need to realise that social networks will continue to influence their customers regardless of their own presence, so they are much better off actively engaging and utilising it than ignoring it. Sites are abuzz with reviews and information and can impact the reputation of a bank in a short span of time

Creating a fully integrated social bank adds a fresh layer of complexity to core infrastructure that is already creaking in many cases. Banks have a treasure trove of data and have multiple channels delivering great feedback from across stakeholders – the challenge is in bringing the data into a single platform and combining social data to get actionable insights.

Technical challenge aside, directly dealing with customers on social media can also be risky and unpredictable. Many brands – banking and otherwise – have seen marketing campaigns backfire spectacularly after backlash from social users. Likewise, they must be well prepared to deal smoothly with negative and challenging contact from customers.  Banks are finding it truly challenging.

Market disintermediation by non traditional players is adding a competitive dynamic to an already competitive market. Banks need to be nimble in defining social use-cases in activating the social banking model .Social needs to be accepted as a powerful tool that can open a new horizon of conducting business. Leading banks have started realising this need and are actively creating a social banking roadmap with well set milestones and deliverables, adapting digital technology without de-humanising interactions

It pays to be social

Despite the challenges, social media can be extremely rewarding when well executed. It offers another valuable channel to gather insight into customer preferences, and combined with data from other channels will provide actionable insights on both individual customer preferences and market trends.

It can help banks improve their revenue growth by providing customers with product and service innovations, strengthen the loyalty loop – by generating more advocates, customers are influential and talk well about the bank products and offerings. Use continuous engagement as a way to restore trust and improving the customer experience, and identify opportunities leading to increase in wallet share.

Banks leading the way

Leading banks have already started leveraging the power of social media to build constituency and confidence in the brand among clients and prospects. In doing this, they create a superior customer experience that differentiates them from competitors. Royal Bank of Canada is one of the first North American banks to enable P2P payments between Facebook friends, and India’s ICICI Bank has also launched an app that lets users pay friends and track group expenses via Facebook. The bank also supports the uploading of funds to prepaid accounts and even buying movie tickets online. Of the Australian banks, the Commonwealth Bank of Australia seem to have made the most progress in this space.  One of CBA’s more innovative social media uses would surely be their CommBank Kaching Facebook app. It functions similarly to an internet banking platform, giving CBA customers the ability to check their account balances and perform funds transfers to Facebook friends – all within their favourite social networking site.

Social CRM is being used to enrich customer data with social media data. This rich information can be used in many ways such as improving risk assessments and shaping more effective customer interactions. We have also seen some innovative players take social strategy to the next level.  For example, Smartypig delivers innovative social banking products.  A customer shares his financial goal with friends, who in turn help him achieve the goal.  Real monetary transactions occur without much privacy issues.

The future of social

The next few years will see banks around the world investing heavily in both infrastructure and strategy for social banking. Australian bank ANZ for example highlighted social media and digital as a “key business priority” earlier this year.

One of the key trends will be moving away from viewing social media as just another marketing channel, prone to stunts and gimmicks, and using it to truly engage with customers on an individual level. Many banks now have dedicated, successful customer assistance accounts, and we believe we’ll see social media start to take its place as a go-to source for advice and engagement and even transactions.  For example RBS’s new “social enabled” customer service process through a network of customer service experts through chat & e-meeting, that also help in crowdsourcing for new  product innovations has improved customer satisfaction rating significantly. ASB in New Zealand took the next step – a virtual branch running inside of Facebook.

We will have many institutions start using social media as a part of the daily operations, as a platform to bring various stakeholders on a same platform, that will help them streamline processes, provide real-time insights  and thus improve the overall banking experience.