Gen Y can be tapped more easily at social media sites than brick-and-mortar branches.
The huge numbers on social media, (a billion globally and perhaps millions in India), leave little doubt as to its popularity. The youth are not just romancing but also starting to inhabit social media.
The response of banks has largely been one of apprehension and doubt. Their concerns of privacy and security are valid. However, opportunities to improve customer engagement, service, acquisition and customer advocacy are immense.
The oft-repeated refrain of many an incumbent player is that their customer profile does not suit alternative delivery channels. But even if 10 per cent of the customer base of a bank is on social media and is growing over 25 per cent, it is big enough to create a significant impact.
There was an interesting technology fit study by Hege Aasheim and Ingrid Stensones on a Danish bank’s social media initiative. The study revealed that the ‘fit’ between social media and banking tasks ranged between high and medium across a range of parameters.
Social media is a cost-effective vehicle for brand building in sync with Gen Y and subsequent generations, whatever letter of the alphabet they go by.
It is an ideal medium to organise promotions to supplement efforts in the physical space.
There is an opportunity to co-create products with customers and crowd sourcing.
Dedicated twitter and blogs are effective to hold real-time conversations with small groups or even individuals, to enrich customer experience.
Real-time online customer survey is another opportunity. These are open communication platforms where banks can listen and interact.
Even if banks choose not to adopt social media out of fear and doubt, customers on social media can impact banks, sometimes even negatively. Even sporadic poor customer service can go viral and delay in response can do immense harm to the image and reputation of bank, not excluding loss of new business.
It is a network amplifier, both at its best and worst.
Banks’ presence on the social media would help in resolving issues before they are blown out of control. The media is also a rich source to understand emerging customer trends and preferences.
It is essential for incumbent players to stay relevant to Gen Y to be in business. An estimated 20 million youth have joined higher education last year and if this trend continues, in the next five years alone, banks have over 100 million social-media-savvy potential customers. Can banks afford to ignore such a huge opportunity?
These young customers offer huge a value proposition. It is cool to be on social media. Social media presence is no longer an option, but a business imperative. It is nobody’s case that brick-and-mortar would disappear. These two channels can reinforce each other.
How should banks get into the game? What are the barriers and challenges?
While banks have invested heavily in transaction processing systems and achieved huge productivity gains, they have not leveraged their huge information base gathered over decades.
Few other industries have such detailed information on customers, such as demography, spending patterns, family history, etc. Some banks have invested significantly in data warehouse and business intelligence (BI) tools but with little effect in capturing customer life-time value, and increase in the number of products per customer.
A blend of the physical and digital is the way forward. Banks can mine and harvest rich information from the social media, and it is a good building block for economic and customer research and trends.
Existing organisation structures and business processes are the two main challenges to be overcome in view of a serious social media foray. The structures are still branch-led. Organisational structures need to evolve fast.
Another barrier to adoption of social media is delay in process upgrades and updates. Initiatives such as centralised processing are not exploited enough. Technology initiative not adequately backed up by enough process upgrades, stymies return on investment.
For instance, the Metro group (cash and carry) had reportedly carried out over 7,500 measures which helped in cost reduction, sales, and margins. The proof of the pudding is converting information into revenue.
Another barrier is lack of social media skill sets. It is not enough to recruit top experts in the area. Banks should develop a broad human resources bandwidth, with digital skills and competencies to blend with other channels.
With social media, it is not just the scale but scope of the information (big data) that one can glean — right from anniversary dates, dress preferences, reading habits, nocturnal habits, spending habits, life styles preferences, attitudes and even mood of the moment.
While it could be parents’ nightmare, it is marketers’ delight. Some banks are investing (misplaced?) heavily in Gen Y brick-and-mortar branches. But do they visit branches or does it make more sense to engage them online?
Nearly the entire spend today is on technology but not on upgrade of information, processes and people. Budgets need to be evenly spread and a ratio of 6:1:1:2 in that order is recommended.
Let me give a 10-point model plan: Establish business goals; establish social media goals and align to business goals; draw up social media strategy; design and implement social media organisational structure; design and implement a plan to build social media operational capabilities; establish a mechanism to handle adverse events; put in place right skills, staff; put in place controls for conversations and the nature of engagement and dissemination of information; get a budget allocated; and create new social media business unit.
This is an opportune time to get into this game well prepared as a large number of engineering and well qualified business graduates are keen to join banks.
(The author is Director, Institute for Development and Research in Banking Technology (IDRBT) Hyderabad. Views are personal.)