Nearly 2.8 billion people globally use the internet, according to the International Telecommunication Union, a UN specialized agency for information and communication technologies.
Of those, nearly half have signed up to social media sites. The highest number of internet and social media users can be found in North America, Australasia, Oceania and Europe.
While consumers and some industries have jumped aboard the social media bandwagon, financial services institutions have been slow to move.
Social media can potentially provide banks with a line of direct communication with millions of individuals in new markets. But at the same time, negative feedback regarding a particular bank or product can quickly spread through the social media network.
In 2009, for example, a disaffected Bank of America customer took to YouTube with a complaint about a rise in her credit card interest rate. Within just one month, 350,000 people had viewed the video and the customers interest rate was returned to its original level.
In adopting a social media strategy, banks need business goals, which sounds straightforward but isnt always the case. They also have to conduct social conversations, identify influencers and provide content for their platforms. This content doesnt have to be current but should be a mix of internal and external material.
Visible Banking tracks more than 1,200 Facebook pages of financial institutions in around 80 countries. This tracking has revealed a number of innovative approaches to social media.
Wells Fargo, which has 500,000 fans of its Facebook page, is inviting these fans and its customers to make suggestions about its banking channels, products and services.
Visible Banking also tracks Twitter and recently announced that Banco de México had reached 100,000 followers. The Mexican central bank sends out around seven Twitter messages a day.
|Christophe Langlois, founder of Visible Banking|
Banks also must tweet and engage with their followers daily. You must understand the popular social media channels like Twitter or Facebook, design and implement a smart ... strategy based on quality content, engagement, response and call to action, he says.
However, many banks feel constrained when it comes to social media. A spokesperson for a large transaction bank told Euromoney: We, and many other banks, struggle with social media because of regulatory issues around data and security, as well as the lack of control social media can represent.
Do we use social media to create communities and dialogue? The answer is no we dont have the resources and there are too many constraints.
Regulation doesnt necessarily stop banks engaging with social media. In Germany, a highly regulated financial market, Fidor Bank exists totally in the social media world. It is not a large bank and arguably can be more nimble than the behemoths of the global transaction banking world.
Customers sign on through Facebook Connect and can view all of their account holdings savings, investments, precious metals and virtual currencies through a single screen. The banks interest rate on savings is determined by how many likes it has on its Facebook page.
|Chris Skinner, |
chief executive of Balatro
He continues: Since the bank launched, Fidor has spent 100,000 on marketing in total. That works out at around 1.33 per customer registration as a cost ... It costs 7 per click for most banks to just advertise a product on Google and get Google click-throughs.
Fidor is getting customers acquired for just 1 per customer.
The potential of social media to improve communication with clients is being investigated by Citi Transaction Services. The aim is to develop a communication interface that will enable clients to access and process information and data generated by Citi across its global network.
Initial developments are focused on internal communication more than 10 million emails were sent and received within Citi during 2011.
The concept of a single page via which Citi staff can share information and plan events has been developed, based on the key advantages of social networks. Everything about a Citi client will be accessible via a single, persistent page on to which users can log. The next step will be to extend the concept out to customers.
Financial institutions tend to move slowly when it comes to technology and by the time acts are together for social media, the world might have moved on.
In April, Piper Jaffray, a US investment bank, published its semi-annual Taking Stock with Teens market research project. The survey of 5,000 US teenagers identified a move away from Facebook, Twitter, YouTube and Google+.
Just over 10% fewer teens this year than last year indicated they are using alternative social media sites.
In October 2011 at a web conference in Dublin, David Shing, a digital consultant at AOL, predicted that defriending and unfollowing would be the next big thing as users begin to realize that the increasing noise on social networks is counterproductive.
The challenge for organizations such as banks in promoting their brands and services via social networks is to avoid adding to the counterproductive noise. It could be that in coming late to the social media trend, banks might not be missing the boat after all.