The Renovation Opportunity for Financial Firms
The explosive growth of communication and social media has left behind many of the world’s most important banks and other financial firms, leaving them staring perplexed at the changes, taking slow and hesitating steps toward this new era, staying at a passive stance when they should actually be eager to maximize the tremendous potential of these shifts.
Banks and other financial firms have a gold opportunity to gain the trust of the people, people who are constantly complaining about how bad their bank’s service is and that clearly show aversion towards financial corporations. This lack of trust reflects in lack of interest, showing why banks are so unpopular in the social networks, with some of the biggest banks in the world (Deutsche Bank, HSBC Holdings, BNP Paribas, Barclays, Citi) averaging less than 9,000 followers on twitter while some other services corporations like Whole Food Markets, Jet Blue and SouthWest Airlines have more than 1,000,000 followers each, that is a result of an efficient customer service and incentives programs.
While some of the big firms are apparently making some efforts towards their customer service, creating “support accounts”, which can spend more than ten hours unattended, it is clear that large financial firms are walking the changes much slower than corporations from other industries. Banks are completely missing the chance to show commitment with their clients and potential clients when they are actually able to track down every single post or tweet that relates to them in order to listen, attend and solve the problems, getting to know who are the persons that pay for their services, what they expect. As a result, this will forge a connection with the clients, showing actual interest in the person rather than just in his or her money. This is, humanizing the financial institutions.
Generating trust and creating a bond with people has to be a priority for such a hated industry in order to generate extra value for the public and for the corporations. A considerable amount of companies only think of social media as a marketing tool, which it is if firms learn to select the correct channels to collocate their brand in, for example, LinkedIn has shown to be the best network for financial companies advertisement, since it arrives to the eyes of wealthy and willing investors. But more than that, social media has opened the path for three major opportunities: The renewal of the whole customer service concept, an expansion of the financial services –through mobile and online banking- and the most powerful bullet… education.
One of the biggest aspects of the social media revolution in the finance world is the mobile banking. The increasing possibilities that smart phones have brought to the table have created an obligation for financial firms to be at the vanguard of technology innovations, offering the basic bank applications is not an extra benefit for the clientele anymore, it has become a necessity. Sending transfers and checking your balance through your phone or tablet, financial planning and being able to make mobile check deposits are just some of the new services that people are demanding; if the masses see one single bank proportionate a new and fashionable service, they will firmly request the same facilities from their financial firm. The development of this new “online banks” cannot accept a failure; the services must be secure and efficient in order to be appreciated by people.
The final resource for creating value for the firms and for customers as well, is education. Big corporations underscore the potential benefits of creating a better informed client, one that understands how to manage properly a debit or credit account, retirement plans, interest rates and a basic understanding of debt, equity and public finance. This can be achieved by persistent, didactic and structured education plans exposed through posts, blog entries or tweets that explain finance basics in order to create the appetite in the consumer, as he starts understanding the stocks, debt and derivatives markets, to invest in more complex and riskier financial services, such as equities and mutual funds, thus, creating a higher value from the actual and potential clients.
The Social Media boom has also had an impact in the way markets react to different kind of events. Information can be so widely and quickly spread, that when a notice, declaration or report breaks out, the markets will be instantly punished or benefited, constantly generating an overreaction from the investors, increasing volatility in the long term. Just as an example, while the average tweets containing “HSBC” in the hours before the Purchasing Managers Index report in late May was around 63.75 tweets per hour, the number of tweets after the report almost quintuplicate... this is fast coverage. A research made by social scientist Johan Bollen showed a correlation between the public mood, alert or calmed for example, expressed in Twitter and the Dow Jones Industrial Average prices, demonstrating an 87.6% accuracy in predicting the price changes. This is why hedge fund managers, mutual funds, and other market players have become very avid Twitter users.
Life is full of changes, but you will always have three ways to face them, you can make the first move, adapt to them or get left behind. Social media is here to stay and will become stronger every day, that is easily appreciable after watching LinkedIn and Facebook entering the NYSE, alongside with the appearance of Global X Social Media ETF. Since most financial firms failed to take the first step it will now be necessary to adapt to this new stage to seize all the possibilities the world is offering, teaching and learning through their clients, attending their needs, acquiring their trust. These efforts will require dedication and investment, but the gains will definitely show up. It is time to act.
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