Social media is the latest buzzword in banking

Social media is the latest buzzword in the banking sector. Every major bank already has a Facebook page and a Twitter handle, and are using social media as a platform to connect with customers.

A 2014 report by Capgemini claims that Generation Y is demanding social media presence from banks; and banks have a lot to lose by confining themselves to traditional and internet banking.

One major reason cited for the necessity of social media banking is the opportunity for interacting with customers and obtaining data for analytics to serve them better. Social data analytics could also provide banks with information about potential defaulters on loans.

Another good reason for banks to have a presence in this growing arena is that positive reactions to customer service can swell in social media. This has a flipside too, but the transparency it brings in will help banks stay on their toes.

Banks, such as State Bank of India, use social networks for reaching out to potential high-profile loan-seekers, conduct sentiment analyses of its Facebook and Twitter followers, and of course, to advertise their products, says Kajal Ghosh, CGM, Executive Support System, SBI.

The trend of social media banking started, notes the Capgemini report, with banks like DenizBank of Turkey and Commonwealth Bank of Australia providing customers with the facility to check account balances via Facebook, and perform money transfers to their Facebook friends. India has caught on, with Kotak Mahindra Bank having introduced its “#Banking”, where digital customers can link their Twitter handles to their bank accounts.

The product has caught on well, says Deepak Sharma, Head of Digital Initiatives at Kotak Mahindra Bank. “15 per cent of our digital users have linked their Twitter handles,” he says.

There are some drawbacks to the concept of social media banking, though. While well-suited for query-based services, such as account balance and propagation of financial information like loan rates, social media can be very unsecure for money transactions to take place.

Banking has always been a private transaction between the customer and the bank, whereas social media revels in its transparent nature. Add to that the fairly minimal security measures available to an ordinary session on Twitter and one doesn’t see much scope for high-value sensitive transactions.

This can be rectified, says Ghosh. “Despite the session occurring on Twitter, a one-time-password (OTP) can be sent to the initiator of the transaction to confirm his identity.”

Sharma is also reassuring about this, affirming that security and customer privacy are at the core of Kotak’s “#banking” initiative. “Social media banking caters to low-value, high-frequency transactions like paying telephone bills, DTH recharges and low-end, e-commerce transactions like book purchases.”

The same transaction limits and regulations that govern SMS banking are applicable at Kotak, he says. The road ahead lies, according to him, in bringing in customer adoption and multiple authentications to maintain transaction integrity.

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