Today's banking industry is more competitive than ever before. Customers no longer feel they have to remain loyal to their bank and have no reservations about switching to a provider that is more effective at delivering what they want.
Banks have lost control of the sales process, thanks to social media channels. Rather than meeting with a sales representative to discuss a bank's offerings and services, customers are relying on Facebook, Twitter, Google+ and other channels to decide what brand they want to bank with.
These social channels allow customers to be much more vocal about their past experiences with a bank. If a customer has a great experience, the bank has an advocate's testimonial for the world to see. If the customer has a bad experience, they can express their frustrations and discontentment to millions via Facebook or Twitter.
That may make some banks inclined to avoid social media altogether. Some firms believe these channels invite customers to advertise bad experiences publicly and will jump-start conversations that can't be controlled.
But the benefits of engaging with customers on these channels outweigh the cons, primarily, because engagement via social media keeps an organization on its toes and ensures customer grievances are addressed immediately.
A disgruntled customer will find a platform to voice his disapproval no matter what. As such, it is in the best interest of an organization to be active on a channel that publicly demonstrates they are fixing the problem.
Also, while customers may publicize a poor experience or a complaint, they also may praise a firm for stellar service. As a result, banks have the opportunity to be both proactive and reactive through these channels. They can readily illustrate their commitment to providing the best user experience to existing and potential customers.
Some banks may also be hesitant to adopt social media because of potential regulation such as Federal Financial Institutions Examination Council's recent proposed guidelines. These guidelines require banks to direct their use of social media channels to contribute to strategic goals.
They also state banks must create policies around the use of these channels, have a due diligence process for managing third-party vendor relationships and incorporate an audit process to ensure compliance with their own policies and procedures. While these rules may seem burdensome and inconvenient, they can ultimately help banks prioritize and optimize effective social media strategies.
Ultimately, banks that are not present or active on social channels are losing the opportunity to learn about their customers. They are putting themselves at an extreme disadvantage and will be perceived as being outdated and obsolete.
Banks should use social channels as a way to better understand the specific wants and needs of their clients. They can see their customers' opinions on their products and services, get a sense for what additional product offerings consumers are interested in and draft changes to existing policies based on what customers are unhappy about. The notion of constant feedback in real time makes these channels so crucial for a bank.
By embracing them, banks will be able to more efficiently interact with their clients, appropriately tailor their messages on a case-by-case basis and increase the likelihood of long-term retention. Additionally, by being active on a variety of social channels, banks are becoming more accessible to their consumers, which ultimately helps to improve their brand identity.
The ability to receive feedback from customers in real time is a huge benefit, and missing out on that advantage is simply asking to fail in this industry.
Sudeep Nadkarni is chief strategy officer of Banking and Capital Markets for MphasiS, an information technology services firm.