Social Media and Banking Essay Example for Free

cordial Media and desireing EssayIntroduction amic fitted media and imprecateing do not seem to take away a strong relation at the first present on the teetotumic, but atomic number 18 indeed complexly related in todays land with the continuous evolution of the bordering sector and the huge imp motivate of kindly media on the masses. firearm today nearly world(prenominal) banks are using favorable media as a connectivity and marketing tool with its clients, Indian banks are also not far behind. ICICI, superstar of Indias biggest banks, al aloneegey boasts a Facebook app allowing clients to view their account details, check statements and provoke their debit card, among former(a) activities, but still maintains a cautious attitude to affectionate media schema. While thither is no doubt that societal media is all the rage amongst retail and advertisings sectors, it is yet to make major inroads in the financial receiptss and banking sectors. A in the raw re port from Ovum, the technology arm of market analyst theater infomonitor reveals that a bulk of banks worldwide arent yet ready to embrace affectionate media.Privacy and Data Security are two of the biggest hindrances to mass-scale accessible media adoption in the banking sector. more(prenominal)over, to a greater extent banks do not recall societal media gives them an edge to engage customers. In fact, they believe that its a dangerous proposition which may compromise sensitive financial data .Startling as it may seem, the recent Ovum query indicates that 60 per cent of the worlds retail banks hold up no plans to spend affectionate media in the future. in that respect are noticeable exceptions though UKs First Direct, Australias NAB, Wells Fargo in the US and Rabobank in the Netherlands have adopted hearty media as a communication line of business. While Ameri passel banks mostly swan on twitter, Australias NAB apply YouTube and Twitter to pacify disgrunt guide customersafter its online banking system down over.And going by the encouraging response received so far, the move show ups to be fetching the coveted results. 14 per cent banks contemporaryly use fond media as a marketing tool, with a and 12 per cent planning to use it to promote their business by the end of 2012. slightly challenges which the sectors susceptibility face are as follows The banking sector relies on sensitive financial data all the eon. though Facebook has made some(prenominal) changes to its seclusion norms over the last couple of categorys, a lot much needs to be done in order to simplify who drop deads to see what information. Perhaps, a different set of privacy controls for banks and financial institutions would help.Given the current situation, its unsurprising that most banks prefer Twitter over Facebook as the former has virtually no privacy vulnerabilities. The Ovum report indicates that social media withdrawers a massive untapped opportunit y for financial institutions. Con tickerer confidence in the banking sector has hit an all-time low and a in-person touch of social media would serve as a perfect shot in the arm to defraud the struggling global financial industry. Before we plunge into this fast deepening relation amid social media and banking, let us first understand some basic concepts ab reveal banking and social media separately.BankingUnder the primaeval Government Act,Section 5(b) in The Banking Regulation Act, 1949(b) Banking mingys the accepting, for the excogitation of contributeing or investment, of deposits of silver from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwiseIn general, a bank is a financial institution and a financial in enclosureediary that accepts deposits and channels those deposits into lending activities, either second baseer by loaning or indirectly through working capital markets. A bank connects customers who have capital d eficits to customers with capital surpluses.Due to their influence indoors a financial system and an economy, banks are generally spiritedly regulated in most countries. Most banks operate under a system completen as fractional reserve banking where they hold unless a smallreserve of the funds deposited and lend out the rest for profit. They are generally subject to minimum capital requirements which are based on an international set of capital standards, known as the Basel Accords.Standard activitiesBanks act as payment agents by conducting checking or current accounts for customers, paying checks drawn by customers on the bank, and collecting checks deposited to customers current accounts. Banks also enable customer payments via other payment methods much(prenominal)(prenominal) as Automated Clearing House (ACH), Wire transfers or telegraphic transfer, EFTPOS, and automated teller machine (ATM).Banks borrow money by accepting funds deposited on current accounts, by accepting term deposits, and by subject debt securities such as banknotes and bonds. Banks lend money by qualification advances to customers on current accounts, by making installment loans, and by investing in merchantable debt securities and other forms of money lending.Banks return different payment services, and a bank account is rented indispensable by most businesses and individuals. Non-banks that provide payment services such as remittance companies are normally not considered as an adequate substitute for a bank account.ProductsRetail banking* Checking account* Savings account* coin market account* Certificate of deposit (CD)* Individual retirement account (IRA)* Credit card* account card* Mortgage* Home equity loan* Mutual fund* Personal loan* time deposits* ATM card* Current AccountsBusiness (or commercial/investment) banking* Business loan* Capital raising (Equity / Debt / Hybrids)* mezzanine finance* Project finance* Revolving extension* Risk attention (FX, interest r ates, commodities, derivatives) * Term loan* gold Management Services (Lock box, Remote Deposit Capture, Merchant Processing) Economic functionsThe economic functions of banks include* Issue of money, in the form of banknotes and current accounts subject to check or payment at the customers order. These cl set abouts on banks flowerpot act as money because they are negotiable or repayable on demand, and hence valued at par. They are effectively transferable by mere delivery, in the case of banknotes, or by mechanical drawing a check that the payee may bank or bills.* Netting and settlement of payments banks act as two collection and paying agents for customers, participating in interbank clearing and settlement systems to collect, present, be presented with, and pay payment instruments. This enables banks to deliver on reserves held for settlement of payments, since inward and outward payments offset each other. It also enables the offsetting of payment flows between geograph ical areas, reducing the cost of settlement between them. * Credit intermediation banks borrow and lend sequent on their own account as middle men. * Credit quality improvement banks lend money to ordinary commercial and personal borrowers (ordinary credit quality), but are high quality borrowers.The improvement comes from variegation of the banks assets and capitalwhich provides a buffer to absorb losses without defaulting on its obligations. However, banknotes and deposits are generally unsecured if the bank gets into difficulty and pledges assets as security, to raise the funding it needs to continue to operate, this puts the note holders and depositors in an economically subordinated position. * summation liability mismatch/Maturity transformation banks borrow more on demand debt and short term debt, but provide more long term loans. In other words, they borrow short and lend long.With a stronger credit quality than most other borrowers, banks do-nothing do this by aggregat ing issues (e.g. accepting deposits and issuing banknotes) and redemptions (e.g. withdrawals and redemption of banknotes), maintaining reserves of cash, investing in marketable securities that basis be readily converted to cash if needed, and raising replacement funding as needed from various sources (e.g. wholesale cash markets and securities markets). * Money cosmea whenever a bank gives out a loan in a fractional-reserve banking system, a new sum of virtual money is created.Laws Related To Banking In India1.1.Reserve Bank of India Act, 19341.2.Banking Regulation Act, 19491.3.Negotiable Instrument Act, 18811.4.Consumer Protection Act, 19861.5.Limitation Act, 1963sociable Media hearty media employ web- and busy-based technologies to stake interactive dialogue and introduce substantial and pervasive changes to communication between organizations, communities, and individuals. Social media are social software which mediate human communication. When the technologies are in place, social media is ubiquitously accessible, and enabled by ascendible communication techniques. In the year 2012, social media became one of the most powerful sources for news updates through platforms such as Twitter, Facebook, and Google+.Classification of social mediaSocial media technologies take on many different forms including magazines, Internet forums, weblogs, social blogs, microblogging, wikis, social networks, podcasts, photographs or pictures, video, rating and social bookmarking. By applying a set of theories in the field of media rehunt (social presence, media richness) and social processes (self-presentation, self-disclosure) Kaplan and Haenlein created a classification scheme in their Business Horizons (2010) article, with six different examples of social media cooperative projects (for example, Wikipedia), blogs and microblogs (for example, Twitter), content communities (for example, YouTube), social networking sites (for example, Facebook), virtual game worlds (e .g., World of Warcraft), and virtual social worlds (e.g. Second Life). Technologies include blogs, picture-share-out, vlogs, wall-postings, email, instant messaging, music-sharing, crowdsourcing and voice over IP, to name a few. Many of these social media services can be integrate via social network aggregation platforms. Social media network websites include sites give care Facebook, Twitter, Bebo and MySpace.Mobile social mediaSocial media applications used on mobile devices are called mobile social media. In comparison to traditional social media running on computers, mobile social media display a higher post- and time-sensitivity. One can split up between four types of mobile social media applications, depending on whether the message takes account of the specialized location of the exploiter (location-sensitivity) and whether it is received and processed by the user instantaneously or with a time delay (time-sensitivity).* Space-timers (location and time sensitive) Exchan ge of messages with relevance for one specific location at one specific point-in time (e.g., Facebook Places Foursquare) * Space-locators (only location sensitive) Exchange of messages, with relevance for one specific location, which are tagged to a certain place and read later by others (e.g., Yelp Qype) * Quick-timers (only time sensitive) Transfer of traditional social media applications to mobile devices to increase immediate apprehension (e.g., posting Twitter messages or Facebook status updates) * Slow-timers (neither location, nor time sensitive) Transfer of traditional social media applications tomobile devices (for example, honoring a YouTube video or reading a Wikipedia entry)Mobile social media can also be used on the go when one is not near a personal computer, lap-topetc. With all the new devices that are arriving at our finger tips, gadgets such as tablets, iPods, phones, and many other new products, on that point is no use for sitting at home using ones PC mobile s ocial media has made other sources of internet browsing obsolete, and allows users to write, respond, and browse in in truth-time. New media of social networking such as Instagram allows the world to link and makes space and time much smaller. Instagram allows individuals to snap a photo wherever they may be and partake it with the rest of the world instantly, delivering a social media site full of foreign accomplishments and strange scenarios. This feature was introduced by Facebook and other existing social media sites, Instagram is a recent addition to the social media scene, and has made picture sharing much easier. Mobile social media is a relatively new platform since it is contingent on mobile devices ability to access the Internet.There are various statistics that account for social media usage and effectiveness for individuals worldwide. Some of the most recent statistics are as follows* Social networking now accounts for 22% of all time spent online in the US. * A tot al of 234 trillion people age 13 and older in the U.S. used mobile devices in celestial latitude 2009. * Twitter processed more than one billion tweets in December 2009 and averages almost 40 million tweets per day. * Over 25% of U.S. Internet rapscallion views occurred at one of the top social networking sites in December 2009, up from 13.8% a year before. * Australia has some of the highest social media usage in the world. In usage of Facebook, Australia ranks highest, with over nine million users turn overing almost nine hours per month on the site. * The number of social media users age 65 and older grew 100 percent throughout 2010, so that one in four people in that age group are now part of a social networking site. * As of May 2012 Facebook has 901 million users.* Social media has overtaken pornography as the No. 1 bodily process on the web. * In June 2011, it was reported that iPhone applications hit one billion in nine months, and Facebook added 100 million users in les s than nine months. * If Facebook were a country it would be the worlds third largest in terms of population, larger even than the US. * In June 2011, it was also reported that U.S. Department of Education study revealed that online students out-performed those receiving face-to-face instruction. * YouTube is the second largest search engine in the world. * In four minutes and 26 seconds 100+ hours of video will be uploaded to YouTube. * One in six higher education students are enrolled in an online curriculum. * In November 2011, it was reported Indians spend more time on social media than on any other activity on the Internet. A brief overview of Indian banks-Pictorial statisticsFacebookTwitterThe Why and How of Social Media w.r.t BankingWhy Social media matters to Banks?Whether a banks ultimate goal is enhancing its brand, reducing costs, increasing customer satisfaction, elevateing innovation ,or driving revenue ,social media can be a valuable pursuit. Enhancing the brandSocia l media can play an important role in differentiating brands and making them more relevant to consumers. Much of its power in this regard derives from the fact that in a consumers mind, the most credible spokesperson a company can have is a person worry me. In fact, research shows that the number of people who trust such a hypothetical person more than they trust brands or organizations increases around the world each year. How can banks take advantage of people like me? American give tongue to, for one, created OPEN Forum, an online community dedicated to connecting businesses with each other and providing valuable content to customers with which the company wants to have relationships. Today, OPEN Forum has more than 10,000businesses involved, monthly traffic has reached as high as 1.5 million visits,5 and the majority of content is produced by the community. The result is a new touch point that drives brand affinity, provides American Express with an immense opportunity to crea te brand impressions, and gives the company a chance to be at the effect of important conversations among its customers.Reducing CostsSocial media can be a major contributor to banks ongoing cost reduction efforts, especially as they pertain to service, gross sales, and marketing. For instance, banks can use social media as a low-cost channel to distribute messages, innkeeper conversations, provide customer service, identify dissatisfied customers, and increase the violation and reach of traditional media efforts. Consider Bank of America, which was the first and largest bank in the world to use Twitter for customer service. The bank uses a dedicated Twitter rapscallion on which a wide garland of real peoplewith their actual photos help customers solve their issues. User feedback reveals the sentiment among customers that receiving help through this page is easier and faster than traditional customer service.In addition to driving customer service costs down, the page creates brand impressions across consumers social graphs, thereby allowing other consumers to see the value of the channel for a mix of goals. The channel also can enhance the impact of marketing. Consider, for example, how Discover Bank recently created a Facebook individualism for Peggy, a character from its popular series of TV ads. Today, that character is liked by nearly 9,000 consumers, and interacts with them several times a day. Such campaigns create millions of additional brand impressions inside of Facebook, as well as new opportunities for brands to interact with their customers in a low-cost format.Creating and improving innovation Banks can use the channel to create better, more innovative products and services that reflect real-time consumer demand. chamfer, for example, created an online community of mass-affluent consumers and tasked the group with designing a credit card purpose-built to their specific wants and needs. The result its highly successful Chase foregoingity participation Rewards card. Chase also created a Community Giving program that allows consumers to direct thebanks donations to specific charities. As of this writing, that community had directed more than $5 million to 100 local charities. Through this initiative, Chases philanthropic entity is opening up its decision-making to crowds and involving millions of people in the process Increasing revenue While the use of social media to drive revenue within banks is still in its infancy, results from other industries further on the growth curve are encouraging. Avis, for example, has been able to use a variety of coordinated social media efforts to boost its sales by 9 percentin a competitive, commoditized industry with flat or declining revenues.As an example of a more specific and successful effort, USAA, a financial services provider for members of the US armed forces, allows site visitors to rate products like auto insurance or home equity lines of credit and add a written revi ew. In fact, USAA customers have added thousands of reviews to products, and consumers have responded strongly In the first year of adding product reviews to the site, USAA claims incremental sales of over 15,000 products. This tactic clearly shows a direct impact on growth and demonstrates the value of people like me. In both cases, using social media to unlock change magnitude revenue requires firms to focus on fundamentals. Providing service that customers want to talk about and delivering products that are worth recommending. at a time those conditions exist, the chance of successfully using social media to drive revenue goes up exponentially. A uniquely contend industryFor many banks, all of the examples in the world are not enough to get off the poping blocks. Typical challenges include External communications are strictly governed by a host of rules and regulations that limit what they can and cannot say. Banks mustiness observe strict rules regarding consumers personal information and data security. Sanctioned employees, whether from customer service, marketing, or another usable group, must be knowledgeable about products, services, rules, and how to get things done within the bankand they must be mature enough to make decisions and craft responses to difficult questions. Plus, all this must be done within the strict legal and regulatory framework that banks inhabit and occur within real time in order to be effective.For many banks, technology itself is a major business when it comes to implementing a socialmedia outline. Banks must identify and implement the tools they will need to be active in social networks, from simple listening platforms to sophisticated tools that enable the integration of social media with legacy CRM systems, customer service tools and workflows, insurance coverage and record keeping requirements, and overall marketing analytics. Finally, some banks will need to overcome a lack of organizational structures and in-ho use talent to derive full business value from social media. More specifically, many banks may find they have to close talent gaps and bridge informal divisions between product-oriented teams, all eyepatch gaining superior leadership support for a company-wide approach to social media. This is no small task, especially assumption the fact that most senior leaders are not well-versed in social media.A highroad toward social media masteryWhile the preceding paints a picture of industry-wide challenges, there is a path that banks can use to produce their social media journey. It starts with gathering critical knowledge that will guide the development of their strategy and assure positive outcomes. To begin, banks must strive to understand what their customers, prospects, and competitors are discussing online, as well as the social technologies that seem most relevant. This includes developing profiles of how various customer segments actually use social technology and understand the practical implications of those uses. For example, strategies for student loan customers may vary widely from those designed for private wealth management clients in areas of execution, content, and technology. Banks also must assess their current social media capabilities and activities All too often there are separate, potentially conflicting social media initiatives under way, as well as underutilized technology, insights, and discover. Banks must begin to consider their collective presence versus that of individual lines of business.Consumers dont make those distinctions, and neither should banks. It is critical for banks to get a firm grasp on what competitors are doing in the social media space, and where white space exists. Bank of America, American Express, and Chase all have done this with their respective social media efforts, but that does not mean no space is left to establish a presence. To find this space, banks have to ask two questions of themselves What can we deliver to our customers that we dont offer today, and howwill it provide them with value? Social media sponsors must critically review risk. Specifically, they must identify specific social media concerns, assess their likeliness, and establish processes to handle adverse events. Prior to involving senior management, it is necessary to have answers to these questions, examples of how others have navigated similar waters, and concrete ideas on the trade-offs between risk and reward.And as mentioned earlier, banks must establish clear business objectives and map them to specific areas in which social media can fall in value. All of the above becomes a moot point if efforts are not driven by real business goals. By addressing each of the preceding areas, social media teams can build senior leadership support for and sponsorship of overall social media efforts. In Accentures experience, successful initiatives typically involve one or more executives with deep passion for and experien ce with technology and social media. It is crucial to find and engage these people and use their influence to open the eyes of the broader C-suite.Crafting a Social Media StrategyAll of this work will organize banks for the successful development and implementation of a comprehensive social media strategy. To be effective , such a strategy must encompass the following areasCrafting the VisionWith an overarching framework in place, social media can be designed from the ground up , versus as a collection of disparate tactics .It also can focus on a specific segments and experiences, as well as on the necessary internal piping to implement social media connections across channels. Indeed, every good customer experience is carefully designed and good social media experiences must follow suit.Defining and Measuring Success A Banks Social media strategy must encompass well- be metrics that reflect progress toward the banks business goals ( as defined in the vision). However, first and fo remost , they must align with the equal type of metrics that drive business today . For Example, a social media strategy focused on sales as an outcome should look at driving traffic from social media, converting that traffic into leads, and successfully cross-sellingand up-selling customers that are interacting across social media channels. In effect, viewing the efforts through the same eyes that traditional channels estimate success.GovernanceA social media strategy should include clear governance and effective organizational structures, whether that factor establishing a dedicated social media center of excellence or appointing social media champions across the banks functional groups and/or product lines. Regardless of the specific measures or structures in place , the banks goal should be to support efficient , effective engagement in social media with the right skills, staff, and controls . this organize must be nimble, include processes for iteration ,and have senior lea dership included.TechnologyPerhaps counter-intuitively, it is only when the vision, metrics , and organizational structures have been defined that the bank should start thinking about technologies and the tactics they dictate. Banks Should start with basic learning and listening platforms that allow them to test the waters and identify areas of potential engagement, and then increasingly integrate that platform with existing CRM tools to achieve a single view of customers. Banks must also consider what technologies are appropriate for record keeping and adherence to the policy.Recognizing that not all starting points are the sameThe level of Social Media experience that a bank has plays an important role while crafting a social media strategy. The scope of the social media strategy depends on the relative social media maturity of the bank. The strategy used by a bank that has significant experience in social media will differ in some aspects from the strategy used by a bank which is new to social media. Banks with less experience in Social Media The social media strategy used by the banks with no or relatively less experience in social media should address the following questions * They should pay attention to the scope in terms of the functional areas covered by the strategy, important business goals, and the business processes used to achieve those goals. *They should also focus on building engagement among rudimentary stakeholders and assessing their willingness to participate in theinitiative This is as much about creating an initial coalition of the willing as it is about telling a compelling story on how social media can positively impact business results. * They should also learn from lean on agency partners and others that have been through the fire before. Banks with significant experience in Social Media The social media strategy used by the banks with significant experience in social media should address the following questions * The Social media c hampions within these banks must know when it is time to seek help from inside and outside the firm.This is needed because the expanding range of social media analysis and reporting will begin to overwhelm marketing staff and merits the involvement of dedicated analytical and technical staff. * As these banks begin to expand the use of social media across product lines, they have to design governance models that can keep pace, as well as focus on integrating social media technologies with CRM systems to achieve a truly holistic view of cross-channel, multi-product customers.Successful Integration of Social Media into the OperationsBanks that have been successful in integrating social media into their operations often have grass-root efforts to thank. These banks have passionate leaders who have led social media efforts for individual product or service lines. The key to moving beyond grass roots and getting the entire organization pulling in the same direction is actively engaging s enior leadership. Only then will the full brand-building power of social media truly be realized.How banks use social mediaAccording to the survey conducted by MHP Communications amongst the heads of communications and public relations specialists at more than 35 global banks to gain an understanding into social media habits across the banking industry. In broad terms, use of social media is high with the majority of respondents (53%), using social media both in a private and a business capacity. 30% use social media outside of a work context and 3% for business purposes only. 15% of all respondents do not use social media at all, which is a high percentage stipulation that social media generally sits under the communications departments remit. Whilst social media has become a mainstream activity, it is notable that more respondents use social mediafor personal means than in a business context. When looking at the purpose of social media, it is widely seen as a good source of infor mation on what is happening in the media (75% of respondents).Interestingly it is less seen as a direct route to the customer, but more to communicate broadly speaking and advertise products and solutions More than two thirds say they use social media for communications and public relations purposes, whereas 42% use it for marketing and sales activities. Customer service is a key purpose for 25% only. In the retail banking sector social media has a more established footprint than in the investment banking world. This follows the reproducible conclusion that for customer service and customer engagement purposes the mass consumer market is appreciative of being able to communicate with banks through these new, yet very much established platforms. And banks are increasingly keen to appear more customer-friendly whilst tackling the image the sector has as consisting of traditional and staid organizations. In the investment banking world social media takes on a different purpose, and h as even become a platform to be feared and avoided.It is also not seen as a traditional direct route to clients. This is changing however, and one senior PR private instructor commented that the banks trading desk recently received a client request for traders to be given access to Twitter to monitor and engage with client comments throughout the trading day. The use of social media within the internal communications function is relevant for around one third of respondents (36%) which represents a vast untapped potential given the range of opportunities to share knowledge and information internally that social media creates. Free tools such as Yammer, Twitter with protected tweets or Google+ with individual circles make information available only to a selection of people, so they can be used to streamline internal communication processes. However, and this is a key problem for a heavily regulated industry such as the banking sector, social media platforms are provided by external third parties.Any shared data which is of a sensitive or confidential genius will in many cases be stored on the providers servers which may not provide sufficient protection or peace of mind for the banking sector. Most providers are based in the US where legislation may, under certain circumstances, require them to reveal their clients identities or other data. Also, social media platform providers are commercial operations and there is the risk that data is misused, misplacedor falsely allocated. Many banks find oneself that sensitive data should only be stored and transmitted on their own infrastructure to ensure full compliance. At the same time, regulatory bodies such as the Financial Services Authority (FSA) in the UK aim to make social media more widely user-friendly for banks by publishing guidelines and recommendations.As a issuance there is a high level of insecurity as to what can and cannot be done. Despite these issues, social media is now seen as forming a strategi c part of a communications program rather than representing completely a tactical activity, with 84% of banks now having a specific social media strategy. Nearly one third has started to execute a strategy, and 15% have a fully developed strategy in place. More than 40% are currently in the process of creating a strategy, and only 16% have not started thinking about or have decided not to have a social media strategy in place. A number of banks do have a social media strategy, but no defined goals for the strategy 27% responded that they have not established specific goals for their social media strategy. Measuring the success of a social media program is perceived to be more complicated than for traditional PR which may excuse why metrics and, in effect, goals remain vague.