Banking Review

Social reticence

Are banks leveraging social media to switch up their customer service
or marketing campaigns? Not enough, it seems

BY JAROSLAW KNAPIK

Salesforce.com has a vision of a social enterprise – an enterprise that leverages the social media and networks ecosystem. We are now in an era of social revolution that includes a plethora of social platforms and apps, but should the banking industry care about the social trends and take an active posture in the world of social businesses?

Ovum’s business trends survey conducted at the end of 2010 indicated low current and short-term future interest in leveraging social media for marketing campaigns or customer service. Most of the banks simply have either no specific plans in this respect or they just don’t care.

The retail banking industry is not part of the ’social revolution’ – at least not yet. However, newer ’social’ technologies or clear compliance guidelines may accelerate adoption of the concept of a social enterprise.

Banks should not ignore tools that enable social enterprise computing

Salesforce’s vision has three major components: Social Customer Profile, Employee Social Networks, and Customer/Product Social Networks. The core of the social enterprise is multi-tenant cloud computing, which is Salesforce’s DNA, and we can be part of this enterprise via any PC, tablet, or mobile device connected to the cloud via the internet.

The data foundation is database.com, which is the database used for salesforce.com, Salesforce’s applications, and is open to third parties. Many banks will be pleased to hear that Salesforce is planning to launch a Data Residency Option (DRO) for this service. The major function of the DRO is that it enables customers to encrypt sensitive data and store it behind their own firewall or in their databases in Salesforce’s cloud.

This allows the creation of a distributed database system, which can be securely accessed by Salesforce applications without allowing the software-as-a-service (SaaS) provider to view the sensitive data. This is a significant development that banks should pay attention to, as there have been a number of outsourcing or SaaS initiatives in the past that have failed due to a number of restrictions related to customer data protection. However, as with every new technology, this still needs to be proven and, in many cases, approved by local regulators.
Social Employee Network is another component of Salesforce.com’s vision. Chatter, a collaboration tool, offers employee profiles, app updates, file sharing, groups, feeds, or status updates. Some call it a “Facebook for enterprises”.

The final component, Customer and Product Social Networks, includes social marketing, and listening to and analysing customers’ conversations. Social marketing is based on the created social customer profiles and social CRM tools discussed above. In addition, Salesforce offers Heroku, which is a cloud application platform, based on Ruby programming language and now also open for Java developers.

This service allows the creation of apps, many of which are designed to work with social platforms such as Facebook. Salesforce also provides a tool for social media monitoring, Radian6 – an analytic tool that enables listening to and analysing of online conversations, and engaging with customers.

In Ovum’s view, it is not enough to simply engage with customers via social media. For social CRM to work successfully, banks also must use monitoring technologies to prevent potential issues. However, the wide range of recently developed ’social’ solutions cannot be ignored; banks must adapt to a changing business environment.

Uncertainty around adoption of a social enterprise vision will remain

While the growth of social media and networks has been phenomenal, the channel’s relative nascence in the banking sector explains why national regulators in most countries have yet to implement policies relating to usage, with the exception of the FSA in the UK and FINRA in the US. The regulatory bodies have a cautious approach and there is a notion that authorities are not quite up-to-date in understanding the extremely fast-changing social media and networks environment, and the nuances of social business.

This is not entirely surprising as in the current difficult climate for financial services, many national regulators are mainly focused on making foundations stronger for the industry they supervise. So far, limited time and resources have been available for the topic of a social enterprise, where it is still difficult to judge the degree of legislation required to monitor, intervene and protect.

Regulators are struggling to keep up with retail banks adopting various strategies, business processes, and technology tools that enable doing business by social means. With this in mind, banks and regulators will benefit from the actions and experiences of others finding their way through the minefield that is social enterprise-related banking regulation. This in turn is creating a ‘wait and see’ approach to innovation, and it is hard to expect banks to be early adopters of the social enterprise vision.

It is important to note that the choice of medium does not change compliance requirements around message or communication (eg. communication record keeping or client suitability for financial promotion). Consequently, banks need to manage the use of social media in this context.

However, we could see newcomers to the industry – in the same way as we have already witnessed various innovators such as M-Pesa in Kenya or Octopus card in Hong Kong – but this time leveraging the social media business. Banks should care about new ways of doing business but time will tell how the vision of a social enterprise will be adopted in the industry.

Jaroslaw Knapik is a Senior Analyst within Ovum’s Financial Services Technology team.