Compliance, Industry Insight, Technology
The Power of Social Media in Financial Services
Apr 09, 2018 • Jessica Zeigerman
Putting the customer in customer service.
Recurring revenue from existing customers is essential for continued success in any industry, but it’s especially important for relationship-based services like banking. Customers want to bank with institutions they like, trust, and feel are looking out for their best interests. Since the housing crisis in 2008, banks have revamped their community reinvestment and outreach programs to rebuild their image and relationships with their customers.
While the CFPB has traditionally provided an outlet for customers to file complaints, social media has become a powerful marketing tool for brands, and banks and financial institutions are no exception. Platforms like Twitter, Facebook, and Yelp boost brand awareness and cultivate an image that can reach millions of people. Research shows that it’s the younger, more educated, and higher income consumer that turns to social media to interact with brands.
Social media isn’t just a marketing platform for attracting new customers. It’s also a powerful tool for serving and protecting existing customers. Consumers increasingly turn to social media to both leave glowing reviews of companies they love and lodge complaints against policies they don’t like. As a result, public feedback on social media channels are gaining influence over consumer protection in the financial industry. This emerging trend has advantages and drawbacks compared to traditional, government-driven consumer protection.
Changing Tides of Influence
Given new leadership and recent turmoil at the CFPB, banks and consumers are asking what will happen next for the regulatory body. In the short time since the CFPB was formed in 2010, it has consolidated and strengthened the federal government’s oversight for consumer protection. In the past, the CFPB pursued legal cases aggressively, turning complaints against banks into black marks that were difficult to remove. Now under acting head Mick Mulvaney, the CFPB’s new mission statement indicates a focus on “regularly identifying and addressing outdated, unnecessary, or unduly burdensome regulations” and a move away from oversight.
While it’s unclear exactly how the CFPB will operate moving forward, the question may not be what will happen, but what is already happening: consumers are taking fair lending and banks’ responsibility to their communities into their own hands through the power of social media.
Social Posts are Publicly Available
When a customer posts a review on social media, anyone can see it. With 91% of consumers regularly or occasionally reading online reviews, reviews have a significant impact on a business’s reputation. 88% of consumers say they trust online reviews as much as personal recommendations. Since social media amplifies both positive and negative feedback, consumers’ dependence on online reviews can greatly impact revenue and customer acquisition strategies - for better or worse.
88% of consumers say they trust online reviews as much as personal recommendations.
The social proof that these platforms are a powerful force is in their ability to both recruit new customers or ignite a PR disaster on a larger and more public scale than a complaint to the CFPB. The upshot? Controlling how public social media complaints are addressed. Unlike CFPB complaints, which typically take time to investigate or resolve, complaints on social media are opportunities for banks to showcase their customer service, apologize, and improve a customer’s experience.
For banks, the most relevant platforms consumers use for reviews include Yelp, Google, and Facebook.
Don’t underestimate the value of receiving direct feedback with consumers. Social media may feel overwhelming at the onset, but when done right, it has the power to position brands as leaders in consumer protection and customer service and grow a loyal consumer base.
The educated consumer uses the publicity of its reviews as a bargaining tool: banks can either respond quickly or risk their reputation. According to research from the CRM platform Hubspot, 53% of users who contact a brand’s customer service via social media expect a response within the hour. Whereas the traditional regulatory system has a reputation for being slow and bureaucratic, the power of social media happens instantaneously.
53% of users who contact a brand’s customer service via social media expect a response within the hour.
Perhaps the most well-known example of this in the banking industry is Bank of America’s attempt to institute a $5 monthly fee for debit card use in 2011. According to reporting from the Washington Post, within a few days 300,000 people had signed a petition against the change that circulated widely on Facebook and Twitter. Another 21,000 people took to social media pledging to close their Bank of America accounts if the changes took effect. Shortly thereafter, Bank of America removed the proposed fee.
It’s easy to see this rapid escalation of issues and the need for immediate response times as a burden on banks. However, it’s also an opportunity for banks to differentiate themselves from the crowd with public examples of responsive customer service.
Social Media Best Practices
In this day and age, banks are given the opportunity to investigate claims and respond appropriately through their social channels. These best practices will help you navigate social media complaints:
- Respond quickly. A short message thanking the person for bringing the issue to your attention and indicating that you’re investigating the matter goes a long way toward building consumer trust.
- Responding publicly? Use this formula. Cite specific issues raised in the complaint, clarify expectations and policies, and explain the resolution.
- Block or flag fake or trolling reviews. Most social media platforms have options to flag reviews that are fraudulent or abusive. Take advantage of this feature when necessary.
Have policies around when to answer publicly. It’s useful to clarify a position publicly, but some issues are context-specific and should be taken offline into a private conversation.
Consumer Protection in the Social Media Era
Banks and other financial institutions should redouble their efforts and attention on the power of social media in consumer protection and customer service. In this age of constant connectivity, consumers hold the power to influence many industries, including financial services. Incorporating customers’ use of social media into a financial institution’s best practices demonstrates reliability and accountability, and in return gains their customers’ trust and loyalty - a win-win for all.