Social Media In The Banking Industry

Published Date: 02 Nov 2017

By

Thato Montwedi

B-Tech Degree

Department of Software Engineering

10 December, 2012

Literature Review

Social media is the new buzz word not only for banks but a lot of organizations are also embracing it and using it as a communication tool for their clients. May people around the globe have access to the internet and the idea of web 2.0 is as a result of the internet development and maturity in the last decade. Levy (2009). Web 2.0 technologies are also known as the social elements of the internet has so much influence that it is even altering how banks are structuring their online profiles. Diane (2007). According to Cocheo (2009) by 2009 16% of banks had already availed themselves on social media, and 62% had not while 22% where planning to register and start using social media. Feig (2007) quoted by Gartner stated social networks will be the leading driver of good customer relationships and 75% of banks will be using web 2.0 technologies to communicate with their clients in retail delivery. Musser and O’Reilly (2006) also describe the term web 2.0 as a movement into the internet as a platform that is causing a business revolution in the industry of computers, and an attempt to understand rules such as building applications that explore network effects to get more people using them. According to Cohen (2009) the main tasks that are being faced by the bank is to lay the foundation by creating tools and IT infrastructure needed to monitor changes in the business environment, develop social media strategies and pursue opportunities making implementation/usage of social media possible within an organization.

There are a lot of characteristics that social media possess but the main characteristic of web 2.0 tools are as stated by Kiyici (2010) that is, the users’ active participation process. The following characteristics are also what distinguish web 2.0 applications from the rest according to Turban and Volonino (2010).

Social media enables us to "take a walk through" users intelligence to "experience" life through their needs and wants.

Data is available in a numerous ways, some of which were never intended.

User experiences are forever changing in a rich and interactive manner.

Programmers are becoming less and less required as that knowledge skill is required minimally.

Opportunities enabling rapid prototypes development have grown exponentially using work-in-progress methodologies.

Social networks have grown beyond its scope. It has become a medium at which information is collected and shared widely.

Web sites are becoming the innovative front on a global scale. Data has become easily accessible and, to those that hold the access key o the information gateway has become very expensive but an essential component to operations.

Web 2.0 vs. Traditional Web

The comparison between the traditional web and web 2.0 media as stated by Turban and Volonino (2010)

There is a better understating and user collaboration between internet users, content providers and enterprise as a whole.

Business processes has evolved dynamically to a point where product marketing are now driven by internal business processes.

Clients, stakeholders & suppliers have a better collaboration medium.

There different types of social media platforms available include blog or weblogs, wikis, social networking sites, RSS, social bookmarking and podcasts. Descriptions of all web 2.0 applications are illustrated in table 1 a below by van Zyl, (2009) below.

Table 1: Van Zyl(2009)

Blogs (weblog)

These resemble online journals and have grown through the definition itself. The owner posts messages periodically which readers subscribe and link to (as well as share links and post comments) in an interactive format. Think, multiple individuals sitting on a table discussing a general topic, where each users shares their comments on the issue/topic. Blogs have become a norm amongst internet users as such internet based publications have adopted such blog type "manners" as to how they conduct themselves or their business.

Wikis

A web site that allows users to collaborate on multiple topics by allowing them to add, remove, change or edit content and also allows linking among any number of pages. They are sorted in dictionary format but users have the ability to change them, as long as their definition is regarded as being correct

Social bookmarking

Regarded as a means of indexing users’ favourite web sites, in such a manner that it’ll enable others to search and view accordingly.

RSS(Real simple syndication)

A format of publishing updated content frequently. Users generally subscribe to their favourite "feeds" and get notified of any changes to the content. A web feed format used to publish frequently updated content.

Tagging

The use of key words to collectively classify (or bookmark) information. Users use this as a means access information grouped under a general group linked to specific word(s).

A collaborative real-time editor

An application that enables you to edit text and/or media over a network by different participants simultaneously.

However the types that banks generally use are described in details below.

Social Networks

Social networking is described by Gopal ,Khandelwal & Moy (2005) as a diagram of relationships amongst individuals which indicates how the connections amongst the individuals exists through various social familiarities e.g family bonds or casual acquaintances. Social networks began in 2001 in the United States with Ryze.com. Initially it was intended to keep like-minded people stay connected. Ryze.com only allowed its members to use their connections for business purposes. However technology innovations has since made very accessible , visible and has since allowed people to get involved regardless of location, number of users, affiliation to a certain group(either workgroup or race) and reputation.

Banks can also create groups on networks such as facebook or twitter to create platforms to open an active corporate dialogue. Bonson and Flores (2011). According to Baltar and Brunet (2012) social network sites can be used by banks to reach a huge number of their clientele to market their products and communicate effectively.

Podcasts, Youtube, RSS and weblogs

Banks can use these types of web 2.0 applications even though they require more time and resources. Although blogging is easy it will also require upper management staff to edit what gets posted on blogs and to ensure that what gets uploaded on blogs is accurate Elmore (2010) . It is common knowledge that banks launch youtube to strengthen their bond with customers and remain relevant in the market. Kapoulas and Mitic (2012).

According to Elmore (2010) youtube is a the most powerful web 2.0 tool but it requires an expect level of technical knowledge to edit video’s that are posted on youtube and proper camera equipment to take the videos. Motley (2010) says that the best practices to posting blogs are to organize it well, update it frequently and have a variety ranging from mini-videos to writing

Benefits associated with banks using social networks.

Social Networking 2.0 enables users who are connected professionally, social or academically to be able to socialize and have each other’s contact details and they are able to recommend their professional connections to others amongst their friend’s lists. These are people whom they trust and do not mind sharing personal or profession information with. This is a different kind of contact list compared to other electronic directories because it is on the internet and its details such as skills and expertise are maintained by the profile owner and are always up to date. Van Zyl (2009).

Van Zyl (2009) further states that users of social networks are reaping the benefits by of the medium by having access to the latest version of a document in that way they are able to contribute to the understanding of the document by adding comments and links from external sources that are relevant to the document.

In many offices there are procedures and practices and sometimes procedures are not always practiced, office social systems help in binding these gaps by enabling co-workers to share thoughts and solutions to problems encountered and issues are solved as soon as possible.Social networks also help in an office environment by allowing employees to contribute to discussions, planning and decision making in their own time through a forum that is open to all employees, this eliminates the stress of sending emails and resending them to participants of the discussion and planning.

According to Arunnima (2009) , the benefits to the customers using web 2.0 tools are that it is convenient to the customer, they are easy to use and customers can share their individual experiences with another. Arunnima(2009) further describes benefits for the banks as reduced costs to servicing customer, improve customer loyalty, increase sales due to referrals by other customers and increasing their reach to their customers. Banks have been looking for new avenues to market themselves and grow their client base in the process. Their marketing team had a challenge in this stage as this was a fairly "new" stream that needed to be explored efficiently and exploited to meet required needs. The answer, namely social media, landed on right on their laps.

 In 2008 Banks made their way into new media stream, conducted research into social media, marketing and what effects it has on banks in general. 62% of banks responded by saying that they don't use social media, while 22% said that they are planning to move into social and new media marketing in 2009. At this current moment (2012) the social media community has seen a drastic change in the industry. Myspace has had its fair share of knocks before its "new" re-launch. But overall, the market has seen major growth within the social media market and, as such, should be a new loop whole that bank associations could exploit.

 Companies and individuals often have different, if not altogether conflicting, perspectives on the topic of privacy. Companies want to protect their sensitive information, but some believe an employee has no right to privacy on social media sites, as is the case with casual monitoring. Furthermore, the perception and definition of privacy among individuals can be highly subjective.

 The good news is that organisations do not have to worry about this as competition has prompted social media networks to "up" their security features. Along with various web 2.0 tools, banks can further explore this possible stream. Oracle Financial Services Software combines its deep domain expertise in the banking and Financial Services industry with its superior technology capabilities and program management skills to help large and mid-sized financial institutions get Web 2.0 right. Corporate banks are increasingly finding that Social Networking applications can be used to enable specific segments of their customers to utilize the expertise and support of the bank’s domain specialists aswell as network and cultivate relationships with each other.

Today FNB, a division of FirstRand Limited, has opened up a large gap in which banks in South Africa are failing to fill. Mainly, by providing solutions that are actually needed by consumers (with all costs included. But it wasn't an easy task, as we shall break the history down in a properly grafted timeline that dates back to the United Stated of America. In 2012, First National Bank decided to take a leap of faith and introduce transaction options for their clients through their facebook account. These options were limited to only one option at the time of launch, purchase of mobile airtime through a user’s bank account. This feature has room for growth, as users will be able to perform more "advanced" transactions through their personal account. But why haven't we been "drowned" with such transactions before? It's more of a "why not" question. Users don't want to be fluctuated with information and in this case, user details have the ability to be exploited as the systemgrows. At the same time, you still want your business to grow so you shouldn't rely on other platforms to put your products on the map. Banking institutions therefore should exploit these platforms from a marketing point of view, but should support these platforms as their client base is forever changing Ravesh Ramlakan cited by Jeanette Clark (2012).

How to get started on social Media and developing a social media strategy

Eid (2011) recommends a social media policy on various aspects such as educating and guiding their social media personnel to prevent errors in judgment and providing maximum mitigation against risk. The policy will also enable the bank to pickup potential issues and sort them out before they become a crisis and negatively affect the organization. McAlpine (2012) also suggests that banks learn as much as they can about how they can use web 2.0 technologies to their advantage before drafting a social media policy and establishing what their goals or aims are.

The following steps were recommended by Mendelsohn (2010) on how to get started on developing a social media strategy:

Banks need to start by doing extensive research before they start engaging their customers.

The next thing that banks need to do is to listen to what people say on social media about themselves or their competitions. In so doing banks will be able to tell which customers of theirs are active online, and what are their concerns as well as what they will like to see happen. Keeping in track with what their competitors are up to will also help banks improve their strategy and attract more customers. Social media mentions can’t be tracked by banks by means of google alerts which is free or use pay service like metrics or social media analytics.

Banks need to know what they are trying to accomplish, know their objective. Because with a clear objective a bank will know what tools are available for them to use and be able to choose which tools best suit their objective.

Experiment with the social media before implementing it in the bank. It is highly recommended that even if it takes the bank CIO or social media consultant creating a personal account first and experimenting with it. If it is difficult for them personally to use it then possibilities are that it will be difficult with the bank too then it shouldn’t be used.

The next step is that of building relationships with their clients, or in case of twitter their followers. Banks shouldn’t make the mistake of only marketing their products and services to people using web 2.0 tools, because it might not gain clients if there are no relationships between them and the bank.

The old notion of that a bank cannot be using social media during working hours will also need to be gotten rid off. Banks will not be using these to talk about general stuff but their core business so it needs to be looked at as also being part of their daily duties.

Measuring of return on investments on social media should be different. What the bank benefits from social media is customer relationship and a good brand reputation and its free advertising for the bank.

The bank also needs to decide what kind of content is it going to be uploading and if they have enough content to build their brand and meet their objective. The content will also need not destroy or damage the reputation of the bank.

The banks will have to be authentic and not cook up numbers about how many fans they have on social networks if majority of those fans are their own employees. The other mistakes a bank shouldn’t make is to intentionally misinterpreting itself be it by hiding negative comments and posting only positive ones or deleting negative fans from their blogs/social network sites accounts.

In these times of fraud It is hard for a customer to tell which social network sites account are authentic or parody, so a bank is advised to verify their account on a social network such as twitter to make sure that their clients know their real account.

A bank needs to decide who is in charge of their social media accounts. A dedicated resource that will make sure that they are well aware of the regulations that come with their job. Customers also come to social media because they need speedy responses to their queries, so a dedicated resource or two can engage with the customers quickly. This person will be also responsible to ensure that confidential customer data or bank data doesn’t leak on these social media and all web 2.0 applications.

Lastly a bank will need to be a little more realistic when comes to expecting results from their presence on social media. The results might not show as quickly as they expect them to but they will eventually show.

Risks associated with banks using web 2.0 technologies and availing themselves on social media.

Privacy risks

Banks and financial institutions may want to look at some of these following tools and applicable business process Web 2.0 Tool. Regardless of how companies and individuals define or perceive privacy, companies need to understand the privacy and protection laws, including those in countries in which they do business. With the increasing volume and depth of personal information available online come increasing risks to privacy. For financial institutions, particularly those operating multi-nationally, the sheer number of laws and regulations related to privacy pose challenges to the adoption of information-based services including social media. When using social media to conduct business, financial institutions must weigh regulatory and legal obligations against their wish to serve their customers or meet business goals. This balancing act is particularly challenging given that the primary purpose of social networking is the broad disclosure of information, including individuals‘personal information. And the issue goes back to security, which has been a constant topic amongst the staff at organisations like Facebook &twitter (who are constantly bombarded with account hacks).

Reputation based risks

Banks can be exposed to reputation/brand based risks by themselves, the media, the employees or clients. A brand can be exposed to reputational based risks if the social media specialist is not well-informed of how to use the platform and when there is no proper social media strategy in place.

Data Leakage & Reliability

As the volume of information that’s available on the web grows, there is also a growing concern of which data is accurate or reliable. Anderson(2007).It is possible that data shared on social media platform might not be reliable and tend to mislead the customer or the media. And the risk of unreliable data being shared to customers is very high on social media. These type of risk as can be mitigated well if there are proper communication channels stated in the social media policy made by the bank.