October 01, 2013

The dramatic changes in consumer behavior brought on by the rise of digital and social technology and social media have brought enormous challenges to all industries. As new channels and technologies pop up every day, old methods of communication, of customer relationship building, for the distribution of goods and services are put to the test.

Add a few layers of serious trust issues and a rapidly commoditizing marketplace and you’ve got the financial services industry. While department and specialty stores enjoy some of the highest average Net Promoter Scores (NPS)—in the low 60s—banks, credit cards and insurance companies continually limp along in the 20s.

And while more than one bank has been called out for a self-inflicted social media disaster, the truth is, financial service firms are proving to be among the most forward-thinking when it comes to social. Forward thinking banking, credit card and insurances companies are waking up to the fact that account holders want more sophisticated online tools—and they’re meeting that demand with some of the most innovative social customer experience offerings around.

more sophisticated online tools

More and more are turning to social media to build and rebuild their customer relationships, and it’s working. By inviting social customers to participate in the business, such as helping other customers and designing new products and services, banks have, in fact, changed the game.

Not only are they reinventing their customer relationships, they’re tapping the operational benefits of social, too. In a highly competitive, commoditized marketplace with zero to low switching costs, financial services are doing something similar to the telecommunications industry when they shifted their customer relationships in a positive direction. They’re launching communities, enabling peer-to-peer support, connecting service agents with social customers across the web and driving huge benefits across the entire business—from NPS lift to reduced support costs to greater adoption of products and services.

[See Related: Crowdsourcing Development of Financial Products: A New Path to Customer Engagement]

Customer experience pros at Australia’s largest online broker, CommSec, for instance, knew that enhanced website features and functionality weren’t going to give them the competitive advantage they needed. They sought a truly disruptive model to make their digital presence stand out, and they got it with a branded online community. CommSec customers can now monitor, buy, and sell stock directly from the community, conduct detailed research and most importantly, interact with trusted user-generated content. Therefore, customers can actually benefit from the knowledge and experience of investors just like themselves.

CommSec

Some market leaders are going even further by using social to invite customers to participate in the business in a whole new way, actually blurring the lines and breaking down distinct walls between brand and customer for mutual benefit. Early this year, we saw the introduction of the Barclaycard Ring offering. As the first of its kind, it was designed not by focus groups or creative consultants, but by its community members. And along with it came a 25% improvement in customer retention and a 50% drop in customer complaints.

Barclaycard ring

The Barclaycard Ring initiative was just the beginning for this truly innovative brand. Breaking down the walls between brand and customer even further, they’ve just launched “Your Bank,” a way of crowdsourcing ideas to help “shape everyday banking for everyone.”

Barclays Bank Listening

This kind of differentiated social customer experience goes right to the heart of three key business challenges Barclays was facing:

1. Digital and social is noisy and confusing: how do I stand out? 2. My products and services are becoming commoditized: how do I innovate on them faster so I can differentiate myself? 3. How can I rebuild trust with my customers and cultivate long-term loyalty?

The social customer experience is fast becoming an important battleground for the financial services industry. Those firms who use online community and social response platforms for marketing, customer care and service innovation are getting huge returns. And while it’s true that the financial industry remains relatively immature compared to others that entered as early adopters, this provides a real opportunity for those forward-thinking financial institutions to differentiate themselves from their competition.

Misha Logvinov is the chief customer officer for Lithium, a company which helps build customer communities online for banks.

[Check out this case study: Major Online Brokerage Combines People, Process, and Technology to Improve End-User Experience, which will be discussed at the upcoming Interop event in NYC.]