While there is no doubt that social media is all the rage amongst retail and advertisings sectors, it is yet to make major inroads in the financial services and banking sectors. A new report from Ovum, the technology arm of market analyst firm Datamonitor reveals that a majority of banks worldwide aren’t yet ready to embrace social media.
Privacy and Data Security are two of the biggest hindrances to mass-scale social media adoption in the banking sector. Moreover, many banks do not think social media gives them an edge to engage customers. In fact, they believe that it’s a dangerous proposition which may compromise sensitive financial data.
IMO, while some of those concerns are valid, others are simply blown out of proportion.
Ovum Research Findings
Startling as it may seem, the recent Ovum research indicates that 60 per cent of the world’s retail banks have no plans to use social media in the future. There are noticeable exceptions though – UK’s First Direct, Australia’s NAB, Wells Fargo in the US and Rabobank in the Netherlands have adopted social media as a communication channel.
While American banks mostly rely on Twitter, Australia’s NAB used YouTube and Twitter to pacify disgruntled customers after its online banking system fell over. And going by the encouraging response received so far, the move appears to be fetching the desired results. 14 per cent banks currently use social media as a marketing tool, with a further 12 per cent planning to use it to promote their business by the end of 2012.
IMO, First Direct UK is the perfect example of how financial institutions should approach the social media ballgame. The bank has enjoyed tremendous success in using social media as a means of connecting with customers and has launched several innovative Twitter campaigns.
As I mentioned earlier, the banking sector relies on sensitive financial data all the time. Though Facebook has made several changes to its privacy norms over the last couple of years, a lot more needs to be done in order to simplify who gets to see what information. Perhaps, a different set of privacy controls for banks and financial institutions would help. Given the current situation, it’s unsurprising that most banks prefer Twitter over Facebook as the former has virtually no privacy vulnerabilities.
The Ovum report indicates that social media offers a massive untapped opportunity for financial institutions and I couldn’t agree more on that. Consumer confidence in the banking sector has hit an all time low and I strongly believe that the personal touch of social media would serve as a perfect shot in the arm to lift the struggling global financial industry.