Sizing Up Social in Financial Services
IESE and GFT lead study on impact of social media
The adoption of social media in the financial sector is giving rise to a host of new challenges and opportunities for companies, according to a new study led by IESE Professor Evgeny Kaganer and researcher Alex Virgili. The study was sponsored by GFT Technologies.
Titled "The Impact of Social Media on the Financial Services Sector," the study suggests that while social marketing activities are advancing steadily in the financial sector, social CRM is growing at a slower pace. Moreover, there is frequently a "misalignment" of CRM initiatives with company activities in the area of social media and the nature of the financial sector.
Preliminary results of the study were presented at a special session at IESE's Barcelona campus on Thursday. The study was based on interviews with professionals from diverse countries in the sector, as well as material on the subject published over the last two years.
Overall, there are 1.5 billion social networking users globally, and 80 percent of all online users interact with social networks regularly, Kaganer noted in the presentation. Overall, 70 percent of companies currently employ social media technologies.
"It's not only the numbers of social media users that are expanding," said Prof. Kaganer, "it's the level of engagement and how much time people spend on these resources."
In his presentation, Prof. Kaganer highlighted specific areas that are growing in the financial sector, notably P2P lending. P2P lenders such as Lending Club and Prosper.com bring lenders and borrowers together online without the need for intermediaries. Meanwhile, firms like Kickstart now offer completely new financing channels for entrepreneurs. Rather than replace traditional financial services, new players will broaden and enhance financial services, said Kaganer.
To illustrate the impact that social media are having, Prof. Kaganer cited an example involving Bank of America. In 2011, consumer Molly Katchpole launched a campaign to stop the company from introducing a $5 debit card fee, using the social networking site change.org. Katchpole was able to collect 300,000 signatures for a petition aimed at halting the planned fee, causing the bank to reverse its decision.
The case illustrates how "social goes beyond the realm of Facebook and could have, in fact, a significant impact on how financial institutions operate," he said.
The objective of the study, which will be available shortly, was to analyze current company practices, as well as future trends and opportunities, Prof. Kaganer said.