Based on the 60 member interviews the Council has conducted over the last six months, five guiding principles appear to separate those firms realizing the promise of social media from those continuing to flounder.

1)  Understand that social media is changing your consumers - The rise of social technologies is changing the way consumers want to interact with their bank, the way they buy products, and how they rationalize post-purchase decisions, as our consumer survey data demonstrates. Leading firms take this alone as mandate to better engage this more aware, empowered and self-directed consumer through social touch points.

2)  Build intestinal fortitude – and experience – by experimenting internally – For many banking executives social media is an anathema.  It hacks away mercilessly at the principles of “command and control” communication, which have safe-guarded information privacy and reputation management, the cornerstones of the industry, for centuries. By experimenting first with internal social networks, leading firms have not only built understanding and raised awareness, but by demonstrating the benefits of these tools, garnered considered executive support for more customer-facing initiatives.

3)  Consider investments as part of a coherent multi-channel strategy – Rather than attempting to emulate the functionality of established channels, leading banks are using social media for what it does best – forging the initial human connection – then driving traffic to established sales and service channels (branch, call-centre, on-line) to exploit the expertise and experience that already resides therein – a “social hub and spoke model”. Likewise, these firms are leveraging the human element of these technologies to deepen on-line relationships and replicate the all-important social component of in-branch interactions.  

4)  Get closer to customers by getting out of the way – As social media drives increased reliance on peer-2-peer communities for self-help, guidance and advice, leading firms are consciously re-imagining their role – their entire value proposition – around supporting and facilitating consumer networks. In effect, using corporate websites to host consumer networks. This approach not only disempowers “shadow” communities, bringing much of their authenticity and credibility on-brand, but generates a wealth of consumer data to help drive better calibrated product recommendations.   

5)  Build the type of community you hoped for with the branch  - For all the hyperbole of “new” surrounding social tools, leading firms take social media merely to be the newest expression of the oldest component of their business: building community and relationships. In particular, the community they hoped to build through branches, a meeting place for consumers and bank representatives, is now being pursued more effectively through the power of social media.

In coming weeks, The Council will release a Social Media Resource Centre with a number of “best practice” case studies unpacking the guiding principles detailed above. In the meantime, register for our upcoming webinar Leveraging Social Media in Consumer Financial Services  to understand how leading providers  are integrating this new medium into consumer banking strategy.

Aware that more and more current and prospective customers are active in social media and are comfortable with remote service, ASB has taken its branch where the customers are: Facebook.

Key Insight: “Convenience” used to be measured in distance to the branch; now it is measured in clicks. Where bank websites require that customers visit a bank-owned URL for service and transactions, ASB has brought its service to Facebook—where customers spend more time than any other website.

Key Features:

• Ease and informality: With minimal clicks, ASB offers formal services through an informal medium.
• Advisor selection: Customers can choose from a range of advisors for specific services.
• Virtual chat: To replicate the personal connection of the in-branch experience, ASB offers virtual chat to assist in customer service.

To learn more about the ASB Facebook Branch and other innovations, visit our Global Innovation Product Library.

It is not often that an entirely new model for banking emerges, but Banksimple is preparing to offer just that. The banking industry can be defined by two key activities: holding money for customers, and then effectively distributing it as their customers request. Banksimple wants to separate these tasks. Their plan: let banks worry about holding money, since that is what they do best, while Banksimple will focus the customer-facing tasks of intuitive, simple products, algorithmically-enabled money management, and superior customer service through their web-only platform.

For more on Banksimple and other innovations, visit our Product Innovation Library.

A new consumer segment is emerging. This segment, characterized by social media prowess, is strongly influenced by a new, global bank called “The Shadow Bank.” Haven’t heard of it? Your customers have, and they are turning to it for advice.

In the last two weeks we introduced the concept that social media savvy customers are more proactive with their financial management, and that consumers who proactively manage finances are more likely to purchase. In other words, social media and financial engagement go hand-in-hand–meaning banks cannot afford to ignore social media or the vital consumer segment it is empowering.

The new segment is armed with advice from a bank other than ours. They come to us pre-advised by the large and growing information network we have termed the “Shadow Bank.” Nearly overnight, the Shadow Bank has market share that rivals the largest consumer banks in the world.  Social media has not just created a new channel for us to consider, it has created a new competitor. Read More »

As the economy begins to recover, so have hopes for consumer bank growth.  However, fundamental flaws within the retail banking model will prevent the restoration of traditional business practices, including:

• The creation of synthetic demand – high volumes of sales were driven by overleveraged customers and unaffordable pricing incentives.
• High-cost sales strategies – prime branch locations caused costs to grow faster than revenue, even at the peak of the housing boom.
• Customer cross-subsidies – disproportionate profits from irresponsible customers meant those who could least afford it paid the greatest fees.

As bank executives begin the process of recovery, the hope of a “return to normal” will never be realized.  Instead, leading institutions will build strong foundations for growth by capturing three key opportunities. Read More »