By M. Isi Eromosele

The advent of social media has resulted in a dramatic change in customer behavior driven by digital communication. This change presents financial services companies with multiple opportunities that could enable them to improve their services, even as they increase their customer acquisition as well as build customer loyalty with their current ones. This can be achieved primarily through customer engagement strategies.

Internet banking has now become a major sales channel for financial services companies. It has progressed from a medium where content was passively read by consumers to a significant channel heavily favored for collaborative and interactive communications and transactions. This is the foundation of social media as we know it today as well as its extension, social networking. As the social networking experience evolves, consumers have become very active in this multi-dimensional setting as major contributors of content.

It is imperative for financial services companies to understand social networking through the analysis of their customers’ behavior as a foundational element. What does social media and networking mean for the provision of banking services, in an age where newly empowered consumers are looking for daily engagement and interactive collaboration with financial brands? Our analysis shows that customers generally have a positive impression of online banking, which could have an impact on their behavior. As such, consumers desire more personalized and targeted services that will be available at multiple touch points of their liking.

Opportunities

The introduction of collaborative web applications has greatly enhanced the success of social media implementations. These applications enable consumers to analyze, discuss and share information online, greatly facilitated by an architecture that encourages participation. A major role in this paradigm is played by blogs as well as social media sites.

There are multiple opportunities present in the social finance market. Digital advertising is one of them, with a business model that allows customers to receive customized messages that addresses their specific needs. This type of advertising is highly personal and interactive. Other areas of social financial services include social lending, investment services and micropayments. To achieve success in these areas, financial institutions should ascertain a strategic intent focused on providing excellent customer experience.

Risks

Even though the digital transformation offers many opportunities for financial institutions to enter new market sectors, there are also linked risks. They will encounter intense competition in web micropayments from private providers such as PayPal. Numerous other application tools have been created by private developers. Many of these tools are Twitter-based. However, these tools are limited by being strictly U.S. - centric.

Social Lending

The Internet has enabled the rapid growth of a new business model in the way financial services is provided online, undermining the customary relationships banks have built with their customers. As such, the evolution in social networking and online social lending and investment services could have a major impact on banks. While a growing number of consumers are being attracted to social lending, regular customers have yet to be lured away from banks. This presents financial institutions with partnership opportunities that will enable them to offer transaction processing, risk management services and securitization for networked private lending operators. To achieve success within the social lending market, financial institutions must develop a multi-dimensional strategy that meets the specific needs of customers within this sector.

M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance

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