Banks Failing to Take the Social Media Plunge
Banks continue to be wildly behind the curve compared to other industries with their use of social media.
This caution is brought on in part due to the financial services sector being heavily regulated—with banks having to tread carefully as an errant Tweet could negatively affect a trade or a client relationship—although, in some cases, it is the regulation itself that is holding back financial institutions from better exploiting the social media landscape.
Most messages sent out by financial services firms need to be heavily audited so responding in rapid-fire to clients or customers on social media sites such as Facebook, LinkedIn or Twitter is potentially a legal minefield.
However, some senior executives at banks are still failing to see how social media adds value, and are reluctant to invest in the concept even though monetarily it is not a huge investment.
“Social media often only requires a miniscule fraction of the seats and revenue required for traditional channels, yet it can provide enterprises with valuable real-time market data,” said Margaret Goldberg, IT services analyst at Ovum, a U.K. consultancy. “However, executives are yet to see this value.”
Firms that do not become more receptive to leveraging the growing power of social media face the price of falling behind their peers. A number of new social networks have emerged in the last year such as Instagram, Pinterest and Tumblr, while others, such as Ping, Buzz and Google Wave, have lost their appeal.
“As the space matures, outsourcers will need to develop or integrate with platforms that are able to work with these new sites and aggregate data for analytics,” said Goldberg. “As outsourcers further expand their social media offerings and their own software, it will be crucial to make these as flexible and robust as possible in order to reduce cost, lower time taken to adapt, and more quickly analyze the massive amounts of data on these sites.”
Some banks, though, are more technologically savvy than others. Earlier this year, a survey by assetinum.com, an information portal for investors, found that Citibank, Societe Generale and ABN Amro were the three best banks with a social media presence.
Another report issued earlier this year by MyPrivateBanking, a research firm, found that Citibank, BBVA of Spain and National Australia Bank were the top performing banks using social media. Its main findings were that the majority of banks it evaluated were still lacking an integrated and strategic approach to social media, in most cases social media was not up-to-date and Facebook, seen as the most important social network, was still the weakest link for most banks.
“We see a widening gulf between a handful of banks worldwide, leveraging social media extremely well to serve existing as well potential customers, and the majority of banks still struggling with the new platforms,” it said in its 2012 report. “These banks need to catch up fast or they will lose a new generation of clients.”
Some hedge funds, though, are also starting to use social media sites such as Twitter to influence their trading decisions.
Gnip, a provider of social media data, supplies hedge fund clients with an aggregate data feed of public social media posts in a bid to better understand public moods and capture breaking news.
Gnip now even claims that it can search, find, analyze and compare all the Tweets ever written. “Social data is an important source for financial companies,” said Seth McGuire, director of assets and financial technology at Gnip.
Hedge funds, too, could be about to move into the world of social media in a much bigger way in the coming months and years as the Securities and Exchange Commission proposed rules in September that will allow investment firms like hedge funds to advertise. It means that this previously secretive world, where even company websites have been off-limits to non-investors, could see hedge funds make their first tentative steps into the world of Facebook, LinkedIn and Twitter.
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