Banks befriend social media

Gayle Bryant | The Sydney Morning Herald |October 20, 2010
http://www.smh.com.au/money/on-the-money/banks-befriend-social-media-20101013-16ika.html

The growing popularity of social media sites such as Twitter and Facebook is encouraging financial services organisations to start interacting with their customers using these channels.

In the past couple of weeks, ING Direct launched a soft social media campaign in tandem with the introduction of Charles – the orangutan that replaced comedian Billy Connelly as the face of the bank. Customers can access Charles’ Facebook page through the bank’s home page and leave comments.

“Charles can chat with people through the site and he is also on Twitter,” says an ING spokesperson. “Our social media campaign is more of an experimentation exercise and we’re leaving it to grow organically.”

Harry Senlitonga, a senior analyst with business information group Datamonitor, says research shows that people who want financial information generally ask their friends – and increasingly these conversations are conducted on mobile devices such as smartphones over social media sites.

“If financial institutions want to reach their customers they need a strategy around social media channels,” he says adding the internet bank, UBank, in particular uses Twitter and Facebook effectively.

“Customers can pose questions on Twitter and be given a quick response by someone from UBank,” he says. “Or UBank can monitor comments going up on Facebook and be proactive about any issues that are being discussed.”

Social media is not just for the young. Datamonitor research shows 45 per cent of Facebook’s US audience is now 26 years or older and the average age of the 10 million people using the Twitter site is 35.

One quirky use of social media designed to help consumers save is SmartyPig (smartypig.com.au), a US product that is offered by the ANZ Bank in Australia. SmartyPig is an online high-interest account that lets customers make their savings goals public so friends and family can help them out by contributing through the website or via Facebook or MySpace.

According to ANZ general manager of deposits Mandy Simpson, more than 70 per cent of SmartyPig users are aged between 18 to 35, with the “typical” customer being a female in her mid to late 20s.

“We believe the response from this group is due to their comfort with online social networking and transacting in an online banking environment,” she says. “In addition to this, SmartyPig facilitates a fun banking experience while providing customers with the opportunity to develop regular saving habits.”

As SmartyPig customers reach their savings goals they can receive what ANZ calls “value boosts” of between 4 and 8 per cent from a range of major retailers, including David Jones, Myer, Harvey Norman, Virgin Blue holidays, Rebel Sport, Target and JB HiFi.

“If our customers decide to redeem their savings with a voucher from the retail partners they can get a value boost in addition to the variable interest rate applied to their savings (currently 5.25 per cent per annum),” Simpson says. “This means that customers can receive extra value of between 4 to 8 per cent on their savings.”

Consumers wanting to borrow or lend money are also using social media. A concept known as social lending or peer-to-peer lending helps borrowers source funds outside traditional lenders, letting individuals borrow or lend money to each other through a social lending platform.

Players in Australia offering this type of service include Lending Hub and iGrin. Borrowers can tap into their network of friends, family or colleagues to access an online personal loan at the best possible rates.

Senlitonga says this concept is reasonably big in the UK where many people couldn’t get a loan after banks tightened their lending criteria.

“We have a low uptake of peer-to-peer lending in this country,” he says. “It is still very new and people that want to lend in this way may still be wary of it. Awareness of these types of models are low and providers would probably need to create better brand awareness in order to increase growth.”

Despite the growth in mobile devices and the use of social media, research from financial research house Investment Trends shows that clients of financial institutions tend to be conservative when it comes to the use of social networking sites. In its 2009 investor/member communications report, 57 per cent of baby boomers had never used any social networking sites, compared with 10 per cent of Gen Y (aged 18 to 25) and 34 per cent of Gen X (26 to 50).

Only 7 per cent of investors said it would be useful if financial institutions used social networking websites to communicate with them, although this varied significantly for different generations.

Senlitonga says, however, it is crucial that financial services institutions start developing strategies for the social media space.

“It is one way to reach people who rarely come into a branch and one way to communicate with a newly forming community to build brand awareness,” he says