There is actually a modicum of truth to each. Social media probably will revolutionize the banking industry, in particular the customer relationship. It will also bring about new levels of risk. The challenge facing boards at retail banks is how to balance the two so as to achieve competitive advantage.
Likely the biggest concern for most board members is that social media takes control of the conversation away from the banks and places it in the hands of the consumer. As a result, customer complaints are often amplified and – if improperly managed – could quickly snowball into a public relations nightmare. Many board members are also concerned about the potential risk of employees acting inappropriately or otherwise damaging the brand in a public forum.
The simple truth is that – like it or not – boards can no longer expect to control conversations about their brand in the public arena. And since conversations regarding poor service are happening on social networks anyway, participation may be the only way that boards can effectively influence them. Indeed, the risk of not participating may represent a much more significant danger to the bank’s reputation than the potential of an employee mistake or inappropriate comment.
Another challenge facing board members relates to measurement. Social media can be a notoriously difficult strategy to quantify, particularly with regards to ROI, which creates a number of barriers for board members. Part of the problem relates to the metrics themselves. Most executives now understand the relationship between increased website traffic and higher sales, increased brand presence and reach. But when ROI is articulated in ‘followers’, ‘likes’ or ‘retweets’, most senior executives tend to become disenfranchised.
As a result, measuring social media strategy in terms of ROI is rather complex and time consuming. It requires organizations to first establish a base line, create a timeline of activity, and monitor existing sentiment and activity on a specific set of sites. From here, it should be possible to correlate this information against key business indicators (such as number of transactions and customers, market share increases, loyalty metrics, number of enquiries and so on) to arrive at a quantifiable metric that the board can understand and track.
Social media is also a strategy that must be owned by the board. In part, this is because social media touches almost every division and function within a bank and requires strategic coordination across the enterprise. It is not unusual for a social media task force to include representatives from marketing, legal, risk, compliance, customer service, regulatory and corporate affairs; addressing the needs and objectives of each internal audience will require leadership at the highest level.
The adoption of social media also tends to involve a somewhat transformative culture change within the organization. For this, leadership from senior executives will be key, not only to ensure that the changes align to the future direction of the organization, but also to provide a visible champion to drive employee utilization and compliance.
The bottom line is that social media is already driving dramatic change in the way customers interact with their banks; those that recognize the change in the market and apply senior leadership to responding will ultimately succeed in the long-run. Those that don’t will find themselves falling further and further behind.
Now it is up to bank’s board members to take the lead in embracing social media and shepherding the organization into the new arena in a way that benefits both the bank and its customers.