Social media platforms present a number of opportunities to financial institutions to forge strong and meaningful connections with customers, attract new consumers and achieve ongoing business goals. Social media channels can play a meaningful role in a bank or credit union’s marketing plan with its capacity for enhanced advertising, improved targeting, developments in Return on Investment (ROI) tracking, and compliance support.
Social media marketing for financial institutions can be challenging on two levels. Firstly, up until recently, compliance and privacy concerns deterred financial institutions from making intensive use of their social media channels. However, Federal Financial Institutions Examination Council’s (FFIEC) guidelines on how to increase social presence have mitigated the risk.
Secondly, most people find anything related to finance boring. Hence, they expect their interactions and relationships, be it in the form of emails, face-to-face or through social media, to be professional, precise, and dry. As this is general image for most financial institutions, it should be taken as an opportunity. After all, social media can be a channel to show the fun, human, and lively side of brands. And to see the generally professional sector have a soft side can be a big boost for a financial brand’s image.
One aspect of social media that is unique to financial institutions is the new technology companies are using to open a bank account or help people get access to credit or a loan. So much so that Financial Technology (FinTech) is an industry in itself, composed entirely of companies that use innovation and new technologies to compete with traditional financial institutions.
In 2008, global investment in FinTech ventures was $1 billion, but by 2013 this figured had tripled to nearly $13 billion, indicates a report by Accenture and Partnership Fund. This revolution has come about with the help of social media that the financial sector has used to boost their e-commerce growth to compete with traditional business models.
No longer a place to simply connect and communicate in real-time, social media platforms such as WeChat and Viber in Asia are increasingly providing a broad range of services, through partners or directly, and have become central to many people’s lives.
With such high levels of penetration, usage and engagement, financial institutions have realized that social media presents an enormous amount of potential to increase their bottom lines and market shares.
However, other than ensuring survival in a quickly changing landscape and getting a competitive advantage over rivals, financial institutions also have to mitigate threats posed by social media such as the public sharing of highly sensitive information.
To use social media effectively, while following FFIEC guidelines, traditional banks, intermediaries and FinTech companies can concentrate on the following strategies and guidelines:
Forging relationships through communication
One of social media’s strengths is its ability to facilitate two-way communication. Instead of simply informing customers and members through brochures, emails and letters, banks and credit unions can initiate a conversation with them. 44% of consumers that use social media interact with financial institutions specifically. This allows mutually beneficial and stronger relationships to be cultivated which help build brand loyalty and increase consumer satisfaction.
Social media helps financial marketers understand their audience in terms of preferences and perceptions through comments, likes, and shares. McKinsey & Company have noted that this provides access to valuable market research at a decreased cost.
With this insight, connections can be made and content that resonates with the target audience can be developed. Since effectiveness of social media marketing campaigns can be measured, financial marketers can continuously refine their strategies to better cater to their market. This allows banks, credit unions, and other financial institutions to generate social responses, while acquiring new customers and members in the process.
99% of people in America have cell phones, however, only 6 minutes are spent on average per day in calls while 26 minutes are spent on texting. 25% of people prefer socializing online rather than in person, 32% rather text than talk and 51% of teenagers opt for digital communication over in-person conversation.
Given the emphasis on digital communication, it is common for debt collectors to gather information from social media as well, since these channels provide information about generations, incomes, locations and what not. And while creditors do make use of this information, they have to adapt to Fair Debt Collection Practices Act (FDCPA).This act states that financial institutions and third-party debt collectors must comply with regulations while using social media platforms to contact customers. For instance, no creditor can publicly disclose that a certain individual owes a debt by writing on his Facebook Timeline. Social media also cannot be used to contact a consumer, or his family and friends, inappropriately.
Even something as uninteresting and dull as banking solutions can be sensationalized with creative campaigns and positioning. Through social media, banking and credit procedures can be portrayed as easy, fun and friendly.
A study by LinkedIn indicates that 63% of mass affluent consumers were motivated to take action after they were informed of financial products and services through social media campaigns. This implies that whether an institution is promoting a solution to business concerns, marketing for savings among housewives, presenting a limited-time offer or highlighting a special rate, it should use social media platforms to generate interest, increase awareness and generally drive results.
Social media can also motivate consumers to take action by helping create a sense of exclusivity and timeliness. McKinsey & Company’s research indicates that using social media campaigns decreases promotions costs, improves effectiveness of marketing and increases leads.
As far as regulations for advertising for financial brands are concerned, they are not as tight as regulations for other industries. For example, the age restrictions that alcohol brands have to cope with.
Basically, banks and credit institutions have to be mindful of their language and terminology and use disclaimers. The Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA) require a specific disclaimer that needs to be made on advertisements and social media profiles. Companies that are insured by FDIC have to include “Member FDIC” in each advertisement and those that are NCUA insured have to display the statement “Federally insured by NCUA”.
It needs to be kept in mind that social media is just a promotional tool. To leverage it optimally, it is essential to balance valuable and engaging content with outreaches that are related to quantifiable goals. The rule of thumb is an 80%/20% scale respectively.
Following the suggested scale, financial institutions should concentrate on connecting banking products and services with clever, creative and social media-friendly content. Through effective combination of intriguing imagery and compelling copies, consumers can be interacted with and encouraged to learn more by visiting defined destination pages on corporate websites.
This strategy has many benefits: it is a mean of initiating an interesting conversation with consumers, it is functional because it provides intriguing bite-sized pieces of information, and it entices them to learn more, thus increasing lead conversion.
Be it new account openings, online load applications, or any other form of submissions, this process has proven to be successful. So much so that a research by HubSpot indicates that lead conversion rates are 13% higher through social media channels, as compared to average lead conversion rates.
One way to increase lead conversion is to nudge people to specific websites and landing pages by running contests and promotions. However, other than platform-specific rules, there are other regulations that financial institutions have to abide by.
Unfair, deceptive, or abusive acts or practices are governed by the Section 5 of the Federal Trade Commission. Banks and credit institutions need to ensure that the information that they have published on any given social media channels is accurate as well as consistent with information published elsewhere. When it comes to contests, wordings have to be chosen very carefully. For example “enter to win” is not acceptable since it implies that everyone wins when they enter. Phrase such “enter for a chance to win” is a better option.
Social media is the need of the hour for financial services organizations. In an environment where one ‘entertaining’ complaint from a dissatisfied customer can go viral and reach crisis stage in less a day, banks and other financial institutions need to harness the great power of social media in order to manage their reputations, enhance customer services, and obtain and maintain a competitive advantage over their competition.
Despite the lure of social media however, it is best to consult with a legal team or compliance officer before launching a campaign. No matter how high the returns may seem, all financial institutions need to ensure that they are compliant with platform, industry, and local government rules before embarking on any social media campaign.