Social media will become a significant channel for retail banks in Europe within three years, according to analyst Ovum.
The analyst firm has found that while Europe is lagging behind, Asia-Pacific and US retail banks are spearheading approaches to social media engagement, believing it to be disrupting the way in which they interact with their customers.
As the economy improves, Ovum expects demand for financial services will drive retail banks to focus on enhancing customer experience, which will translate into increased sales and more effective servicing. According to its research, banks need to use social media as a true customer engagement tool.
The analyst urged banks to begin to fully integrate social media into their customer communications strategies, evolving their use of various platforms such as Twitter and Facebook. This requires a shift away from the way banks have traditionally dealt with customers.
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There are also security implications. Ovum recommended that banks implement relevant risk and compliance requirements to ensure data security and privacy.
Jaroslaw Knapik, senior analyst within Ovum's financial services technology practice, said: “It is now almost impossible to ignore social media. Social media provides a powerful marketing platform for understanding and engaging with customers, allowing banks to improve sales and profitability.”
However, his research found that European banks voiced concerns over data security, ensuring data privacy, as well as the potential reputational damage that can come from a mismanaged communication.
Last year, Barclays adopted Salesforce’s enterprise social networking tool Chatter to help sales teams keep closer contact with their customers.