Impact of Social Media in Banking
The high distribution of social media in the private environment drives banks to deal with the application possibilities, opportunities as well as threats posed by social media. Social media marketing has increased due to the growing active user rates on social media sites. As social networking becomes more popular among older and younger generations it becomes imperative for banks to understand the opportunities and potential threats from Social Media.
In 2019, Merriam-Webster defined "social media" as "forms of electronic communication (such as websites for social networking and microblogging) through which users create online communities to share information, ideas, personal messages, and other content (such as videos)"
In the United States, 81% of users look online for news of the weather, and in 2010, 75% of people got their news forwarded through e-mail or social media posts, whereas 37% of people shared a news item via Facebook or Twitter.
Businesses can use social media tools for marketing research, communication, sales promotions/discounts, informal employee-learning/organizational development, relationship development/loyalty programs, and e-Commerce. Financial industries utilize the power of social media as a tool for analyzing the sentiment of financial markets. These range from the marketing of financial products, gaining insights into market sentiment, future market predictions, and as a tool to identify insider trading.
The Banking industry is aware of the power of social media. Citibank uses social media to show off their investment banking prowess by promoting their history in investment banking through social media. BNY Mellon put out their quarterly revenue reports on social media to show how their businesses are doing well. Even transactional banking on social media is already being put into practice by some banks like ICICI Bank & Kotak Mahindra Bank.
In the future, the key to sustainable growth might become dependent on a bank’s ability to shift towards a digital-first approach successfully. As the world continues to become more digital-savvy the banks must develop not only a presence on social media but also strategies to use it optimally for customer engagement and growth.
What is the current business challenge?
The importance of Social media, such as Facebook, Twitter, and Blogs are increasing rapidly. Currently, Banks does not have a clear strategy on how to act in this area. SM’s bring us both opportunities and threats. We as a company should decide on how to maximize the opportunities and best meet potential threats.
Key considerations
- Should Banks be proactive, reactive, or non-active in this field?
- Should we build internal capacity or partner with experts?
- What are our competitors doing?
- How can we benefit from this as a channel building our brand stronger considering interaction with and impacting groups such as consumers, clients, partners, employees, media, and perhaps even regulators?
- Regulatory/Compliance risks, e.g. data integrity, personal integrity, IP, work/life balance, etc
What is the goal of this project?
- To help Bank to understand the opportunities and potential threats Social Media brings the current trends, and to decide upon how to act including indicative cost and benefits related to proposed actions
- Market analysis with best and worst practices and trends – use competitors and adjacent business segments. Real examples that help us understand the power of Social Media – positive and negative
- A “cookbook” for how to act and what to potentially gain while allowing each line of business to assess their specific situation and to decide upon their own actions
Banking Domain Knowledge - Resources
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