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The role of social media in the banking industry

These are not easy times for today’s bankers. On the one hand, increased regulatory pressure and public scrutiny is pushing the issue of trust to the front of the business agenda. At the same time, new technologies such as social media and customer preferences are forcing banks to adapt their business models and evolve at an unprecedented pace.

Some would argue that – in the midst of all of this change – banks have no time to ‘play around’ on social media, let alone pour much-needed capital into it. Better, they say, that banks stick to their knitting and focus on getting the basics right. Besides, this is not the time for banks to be taking on new risks (both financial and reputational) for the sake of social engagement.

Nothing, however, could be further from the truth. In fact, one could argue that social media – when properly harnessed – could be the solution to almost all of the problems that banks currently face. From customer loyalty and the re-establishment of trust through to new product development and more efficient approaches to customer service, social media offers innovative banks a fairly straightforward and cost-effective approach to transformation.

Building trust and engaging with stakeholders

Already, many of the world’s most innovative banks are leveraging social media to create competitive advantages. Indeed, the real question for banks is no longer whether they should invest in social or not, but rather how they can use social to improve everything from the customer experience through to culture change.

Given the current ‘trust deficit’ between banks and their stakeholders, many banks are looking to social media to help shore up their relationships and re-engage their customers. According to Mark Nicholson at ING DIRECT Canada, social media can be a valuable tool for improving customer service and identifying and responding to customer complaints. Vineet Arora of ICICI Securities says his bank is using social media ‘gamification’ to engage customers and improve financial literacy.

But banks will need to rebuild trust and engage with other key stakeholders too. Financial regulators in particular will be keeping a watchful eye on how banks are using social media in their client interactions, so bank executives will need to ensure that the realities of social media are being embedded into their compliance strategies and change programmes.

Driving culture change

Recognising the nexus between employee engagement and social media, many banks are starting to explore how social platforms can be harnessed internally to help support behavioural and cultural change. Indeed, using social platforms to drive internal collaboration not only delivers great returns, but also provides a roadmap for transforming the business into a more client-centric and innovative organisation. One area that has been gaining particular attention is crowdsourcing, where organisations use social media tools to build a collaborative ‘crowd’ of employees that can be tapped into at any time to help solve problems, evaluate ideas, or take the pulse of the employee community.

Testing new approaches and creating opportunities

The rapid adoption of social media hasn’t just created a new channel for banks, it has also spawned new business models and – maybe – new revenue opportunities. Alistair Grier of RBS and NatWest, for example, says his banks’ development and participation in BizCrowd, a free online business supplier community, has helped them build their profile in the UK’s small to medium-sized enterprise (SME) market.

Some of the more innovative banks are also looking at emerging social trends to see if they might offer a new competitive advantage or access to an untapped market. Virtual currencies – such as Bitcoins and Ripples – likely fall into the latter category, but few banks are willing to take on the risk or complexity of dealing with an unregulated currency.

The growth in popularity of crowdfunding may also create new opportunities and challenges for traditional lenders, particularly for those operating in the developing and emerging markets.

A case study: Nigeria’s GTBank

While much is often said of the West’s ability to innovate – particularly in banking – Africa is in fact emerging as a hothouse of innovation for social media in the banking sector, particularly in the use of Facebook applications to improve access to services. Few banks have embraced social media as fully or as successfully as Nigeria’s GTBank. Today the bank is one of Africa’s most ‘liked’ brands on Facebook (in 2013 it reached the one million fans mark) and has a digital footprint that extends to Twitter, LinkedIn, Google+, YouTube, Instagram and, most recently, Pinterest.

In the beginning GTBank focused its social media strategy on customer service and engagement. Even today, the bank sees social media as an opportunity to ask itself a simple question: what do customers – and prospective customers – really want from their bank? The results have helped them to define strategies and make decisions concerning the placement of new ATMs, the roll-out of e-branches, and even the placement of a full-service branch.

In Nigeria (like in South Africa) it can be difficult to communicate important messages to a wide audience and so social media has also helped GTBank identify and communicate enhancements and problems with its products and services. The bank now boasts a fully functional online social media customer care team (available 24 hours a day, seven days a week) and has launched a banking application which allows people to open GTBank accounts on Facebook. GTBank also recently re-invented their quarterly digital magazine (called Ndani, which means ‘inside’ in Swahili) as a major social media presence replete with Ndani TV, the Ndani blog and Ndani Facebook pages.

With GTBank’s success growing by the day, we believe that – in the not-too-distant-future – Western banks will be looking to Africa for best practices in social media, not the other way around.

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