To say that social media has become part of our daily lives would be an understatement. Internet users tend to spend most of their time online on sites like Facebook and Twitter talking to friends, looking at photos and making status updates for everyone in their network to see, studies have shown.
But less than a decade after Mark Zuckerberg’s creation took over the world, at least one segment of society refuses to hop on to the social networking bandwagon—banks.
Most companies now tap social networks to reach larger markets. Local telcos are now more effective in addressing customer concerns when reached through Twitter, while cosmetics companies have put up “Like” pages on Facebook to show everyone just how effective their products are.
“Based on feedback, [banks] are still trying to get a feel on how to go into social media sites,” said Allan Tumbaga, president of the Bank Marketers Association of the Philippines (BMAP).
Tumbaga said local banks may be slow in adopting their own social media strategies, but industry players are aware of the potential of social media as a way of reaching clients.
“Banks are really interested in setting up (social media accounts),” he said. “The trend is for everyone to go into social networking … it’s becoming a relevant communication channel for our customers, and we want to be a part of that.”
And the numbers back this up. As of the end of last month, there were an estimated 750 million users on Facebook. About 30 million of those users are from the Philippines, which means a third of the population is on Facebook.
Social networking sites allow companies to reach and interact with their customers like never before. These can also be a vital tool in reaching more than one in three Filipinos that do not have access to banking services today.
BMAP already sat down with several Internet marketing gurus to learn how to capitalize on the social media phenomenon, focusing mostly on how the channel has been used by foreign banks.
“We want to learn from the experience of other countries and adopt the best practices here,” Tumbaga said.
Overseas, giants such as Citi and Bank of America have used social media as more than just a marketing tool. They tap sites like Twitter and Facebook for customer service, market research and for building communities with clients.
But according to Tumbaga, banks are also being extra-careful about social media, where a company is prone to critical bashing from the public.
As a result, local banks believe that the gains to be had from social media are just not worth the trouble yet, Tumbaga said.
He explained that the smallest rumor about an institution’s financial problems can easily go “viral” and explode through various social networks, leading to a possible bank run that may affect not just a company and its customers, but an entire economy as well.
The trepidation is shared by many foreign lenders as well. A recent survey by Datamonitor showed that as much as 60 percent of the world’s banks have no social media plans whatsoever, while just 6 percent of retail banks maintain accounts, but merely to answer basic queries from customers.
Tumbaga said this apprehension is understandable given the nature of the banking industry, where every risk has to be measured.
Another concern for local banks is security.
Tumbaga said many companies have yet to understand the possible risks of interacting with their customers through social networking sites.
He said some customers can be tricked into divulging sensitive information, such as credit card numbers and passwords.
But Australian technology research firm Ovum said financial institutions had no reason to fear social networks, given the media’s growing reach and relevance to the lives of customers.
“The banks, without a social media strategy, are being short-sighted and are placing themselves in a dangerous and vulnerable position compared to competitors who have realized that social media can and must play an intrinsic role in their business,” Ovum analyst Marth Bennet said.
The company said a handful of retail banks have begun to use social media such as First Direct in the UK, Citi, Bank of America and Wells Fargo in the United States, and Rabobank in the Netherlands.
“They are still feeling their way, and their strategy is very much a work in progress,” Ms. Bennet said.
“These banks have been justifiably held up as industry leaders for their use of social media. However, there is no universal acceptance that social media is either important or suitable for retail banks,” she added.