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Knapik: banks should handle social media with care

Social media can add value for banks, but they need to be careful that the risk of damaging their brand does not outweigh the potential benefits, according to Jaroslaw Knapik, senior analyst, financial services technology at Ovum.“Banks could destroy their reputation using social media,” he said. “It can bring added value but you need to know what you’re doing. If used wrongly, it could produce so many negative responses that it would reduce value rather than add it.”

Major financial institutions have been relatively cautious in their approach to social media. Most banks have a twitter account, and some also have a Facebook page, although participation on Facebook is patchy; Barclays has a page, HSBC does not. However, compliance issues can sometimes limit the potential of these tools. Many large banks simply issue pre-approved tweets and other social media content, without necessarily directly engaging the customer in conversation.

Compliance software does exist to scan tweets drafted by bank employees, and either publish them if considered low risk or forward them to a manager for approval if considered high risk. But the technology is not universally used, nor is it cheap to install. According to Knapik, some institutions have simply opted to side-step the whole issue by refraining from engaging with social media at all. Yet he insists that to take that approach would be a huge missed opportunity.

“Social media can identify people’s needs,” he said. “You can use it to analyse customer behaviour and sentiment, which will then generate leads and help direct sales staff to the right target individuals and organisations. Ultimately, it provides a low cost way to drive up revenues.”

Facebook provides a strong example, because it reveals a relatively high amount of information about individual users. That information can then be fed into marketing campaigns, to make the content more relevant to each individual user. There are pitfalls, however; film-maker Disney discovered that its attempts to use its Facebook community to market products produced a hostile backlash serious enough to dissuade the firm from continuing.

“Social media is not a silo – it is part of the customer experience,” said Knapik. “Consider your target audience carefully. For example, if you are targeting people who don’t use social media, then there is no point in a social media campaign. You have to be careful. But the bigger picture is that customers are moving towards greater use of digital channels – and social media can be a revenue growing technology.”

Research released at the end of March by Accenture does support the conclusion that customers are gradually shifting from using branches and telephone calls towards digital tools such as online and mobile. According to the Accenture statistics, UK and Ireland daily and weekly branch visits fell from 19% to 15% and daily and weekly online banking activity fell from 69% in 2010 to 61% in 2012. Meanwhile, inherently brief, daily and weekly mobile banking more than doubled – from 7% in 2010 to 15% in 2012.

In response, some newer banks are adopting elements of social media and attempting to make them a core part of the service. Alior Bank, based in Poland, was founded in 2008 and, according to Knapik, is currently working on both a messenger style chat facility for its website, and a video link similar to Skype in which the customer can have a face-to-face conversation with a bank representative.

“When you have a conversation in the digital world, you can capture it easier – and the information can help banks to connect with the consumer,” said Knapik.

Meanwhile, others have turned to the concept of ‘big data’ to help unpick the best way to use social media. In May 2012, Citibank announced that it had entered an agreement with IBM to use IBM’s famous supercomputer ‘Watson’ to analyse customer needs and help improve the bank’s services. Watson gained international fame in 2011 when it successfully defeated human champions Brad Rutter and Ken Jennings on US quiz show Jeopardy! The computer is known for its ability to process 200 million pages of structured and unstructured content, consuming four terabytes of disk storage.

Other social media analysis tools have been launched in recent months. In January, British IT firm Integritie launched a tool called SMC4 designed to redirect incoming social media posts effectively and hide aggressive or inappropriate content to avoid damage to the bank’s image. Then in February, NYSE Technologies introduced a social media sentiment tool to its SuperFeed and SFTI network, allowing users to gauge directional and volatility indications on individual stocks, exchange-traded funds, sectors and indices by measuring the level and quality of social media interactions.

“It is important to remember the bigger picture,” said Knapik. “In the end, we are seeing a broad shift towards digital channels, both from consumers and from banks. Social media is not the only part of that – but it is an important part, and so long as you know what you are doing, it can offer real opportunities to reach the customer and provide a better service.”