Banks need to jump on the social media bandwagon

Banks need to adapt to the rise of social technology

Retail banks need to prepare to adapt their business models to the growing consumer interest in social media, according to a report by analyst house Gartner.

While social banking – an approach to retail banking that promotes transparency in the connections between service providers and clients – will not take off immediately, Gartner says, the model will help banks meet consumers' needs to access and use financial products and services.

Financial social networks and microfinance were also cited as tools that could help banks adapt their services to new customer demands and reinvigorate customer relationship.

In this new model, "the bank takes its place among a series of loosely connected financial and social relationships mediated by online social-networking media and tools," said Stessa Cohen, research director at Gartner.

This would provide customer with transparency on pricing and service, enabling them to compare competitors, said Cohen, as well as exposing pricing strategies that reward loyalty from customers and encourage multiple account holdings.

Cohen’s advised banks is to create a social media strategy and ensuring the technology is available to support such projects. Opportunities to create partnerships between retail banks and social banking providers should then be assessed, rather than trying to build their own social networks.

“Without planning for the emergence of this new financial services environment, retail banks will not only be disintermediated, but also miss a significant opportunity to transform their operations and customer focus,” said Cohen.