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Social Media And The Next Generation Of Lending Customers

Banks will have to further their marketing efforts in social media to attract Gen Y customers as they begin to look for more complex financial products, including loans.

With interest rates expected to rise in the near future and refinancing opportunities likely to dry up as a result, lenders have to be prepared to reach out to new customers. While traditional methods of acquiring new lending customers can be costly, social media could provide a cost-effective way to market to new, younger customers for loans.

“The lending market is going to be a purchase market. We’re expecting to see a surge in the purchase market,” Ghazale Johnston, a managing director at Accenture Credit Services, notes.

A recently released survey by Accenture found that 29 percent of consumers would like to receive educational information from their banks via social media.

The survey, “A Critical Balancing Act: U.S. Retail Banking in the Digital Era,” also found that younger customers — who will soon be looking for more complex financial products, such as loans — are more engaged in social media, with more than 40 percent of those surveyed in the 18-to-24 and 25-to-29 age ranges calling themselves very active social media users. Loan products are an ideal area for banks to engage in educating potential customers because the products are complex and there’s so much information to share, according to Johnston. “The transaction process takes a lot longer with lending. There’s more info to share; it’s a more engaged audience. Social media can give you an interesting opportunity to differentiate from your competition by making your products easier to understand,” she advises.

Beyond sharing information about specific lending products, Johnston says, banks are using social media to offer updates to interest rates and to provide information about what documents customers need to fill out to complete a loan application.

But customers are less interested in actually doing transactions, especially ones as complex as loans, through social media, according to Accenture’s research. The consumer survey found that 74 percent of the respondents wanted to keep their financial activities separate from their social networks. “They want to use social media for locating a branch or gathering information. It crosses the line [for many customers] when you use it to exchange information,” Johnston suggests.

Loan officers also are leveraging social media to do traditional networking, says Teresa Epperson, a managing director at AlixPartners. Loan officers would often ask clients about friends or family who were also looking for loans, but now those conversations are moving to social media, Epperson explains.

Banks have to step up their efforts to reach out to potential customers via the online channel because customers are doing so much research on their own online, Epperson says. Even most customers who go into a branch to buy a product have already made up their minds what they will buy based on previous online research.

In order to stand out and better engage younger customers online, banks are going to have to include social and gamification aspects to their marketing, Epperson observes. “Going forward, banks will have to think about how to incorporate experiences into their promotions,” she explains. AlixPartners’ research shows that mobile shoppers, which skew toward younger demographics, want to have social, gamification, and entertainment dimensions to their digital experiences. About 20 percent of mobile shoppers want all three dimensions to their experiences, and 56 percent of them want at least one of them.

One way for banks to engage younger lending customers with such multidimensional digital promotions is through social media marketing tools, such as social lending calculators. “These social tools could link to a bank’s rate and can help a customer figure out if they’re ready for a loan,” says Ed O’Brien, director of the banking channels advisory service at Mercator Advisory Group. “This helps the brand because the customer feels like they are being put in a position to be successful.”

Younger customers in particular, who may be looking for their first loan, would likely be interested in such tools, O’Brien suggests. For first-time lenders, the complexity of the lending process can be intimidating, and offering tools that can give these customers some knowledge and visibility into the lending process helps them get sense early on if a loan is right for them, he explains.

Calculators Go Social

One such tool is Shastic’s Facebook-based lending calculator called Calcubot. The first version of the tool was launched in 2012, with an update released this year. Before designing the tool, the company researched how banks were using Facebook to market their products, says Joseariel Gomez Ortigoza, Shastic’s founder and CEO.

After surveying 300 banks, the company found most of them had no idea what to do with their Facebook presence. “They didn’t have any tools to align their social media strategy to their business goals,” Ortigoza recalls. “So we built an engagement tool [to address this problem] with a simple gamified experience.”

Shastic’s Calcubot can be embedded into a bank’s Facebook page and can link back to its online application forms. By leveraging the multiplying effect of social media, the tool gives banks the opportunity to reach a large new audience with minimal investment, Ortigoza adds. Customers who use Calcubot can “like” it on Facebook to share the tool with their social connections. Kirtland Federal Credit Union (asset size $652 million), one of the nearly 50 financial institutions using Calcubot, implemented the tool in August and has already seen results in engagement, according to Tim Gonzales, the credit union’s data research specialist.

Kirtland is using the app for both mortgage and auto loans, says Gonzales, who analyzes the effectiveness of the credit union’s marketing campaigns. Right now 77 percent of those interested in auto loans who click on the tool complete a loan calculation with it, and 55 percent of those interested in home loans complete one, he reports. The credit union is still in the process of determining how many of those customers go on to apply for a loan.

One of the main factors in the bank’s decision to adopt Calcubot was the need to attract younger customers. “The average age of our customer base is over 50, so we definitely want to tap into younger customers,” notes Gonzales. “We want to grow our loan inventory overall, and we are definitely aware that Gen Y customers are beginning to arrive at an age where they are looking for more complex financial products.”

[See Also: Banks Aren’t Social? Think Again]

Jonathan Camhi has been an associate editor with Bank Systems & Technology since 2012. He previously worked as a freelance journalist in New York City covering politics, health and immigration, and has a master's degree from the City University of New York's Graduate School ... View Full Bio

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Greg MacSweeney
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Greg MacSweeney,
User Rank: Author
3/27/2014 | 7:11:05 PM
re: Social Media And The Next Generation Of Lending Customers
Right. Positive, or negative, you have to respond or the social media community will make you look silly. Now, you don't have to respond to every crazy comment that you receive...but legitimate complaints need to be addressed immediately before they snowball.
Eric Villarante
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Eric Villarante,
User Rank: Apprentice
3/27/2014 | 12:19:48 AM
re: Social Media And The Next Generation Of Lending Customers
I agree as well. I don't feel secured doing these kind of transactions on social media. But I definitely agree that by leveraging social media, banks could use it to reach far more customers like the young customers to give a high level overview of their services. It would also be easier for them to decide and weigh on the offers.
Kelly22
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Kelly22,
User Rank: Author
12/26/2013 | 6:31:33 PM
re: Social Media And The Next Generation Of Lending Customers
Agreed - social media just doesn't seem secure enough to handle personal information. That being said, I think banks should take advantage of social media outlets to provide information to young customers, especially relevant information regarding student or auto loans.
Jonathan_Camhi
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Jonathan_Camhi,
User Rank: Author
12/26/2013 | 6:07:55 PM
re: Social Media And The Next Generation Of Lending Customers
Yeah all of the advice that I've heard is that you have to engage with the negative comments right away and deal with them. You can't pretend like they'll go away or they don't exist. Part of meeting customer expectations is helping the customer when they aren't happy.
Jonathan_Camhi
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Jonathan_Camhi,
User Rank: Author
12/26/2013 | 5:47:10 PM
re: Social Media And The Next Generation Of Lending Customers
I agree but bank also have to be mindful of the fact that many customers (even young ones) aren't comfortable yet doing a transaction are inputting personal financial information through social media yet. The tools have to be strictly about gathering information about products and services.
Kelly22
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Kelly22,
User Rank: Author
12/26/2013 | 5:29:21 PM
re: Social Media And The Next Generation Of Lending Customers
Very true. One best practice I've heard is constantly responding to inquiries/comments on social media - good or bad - to gain a positive reputation for customer service. It would help banks to have someone constantly monitor social media accounts to ensure that the bank is always responding to consumers' needs.
IvySchmerken
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IvySchmerken,
User Rank: Author
12/26/2013 | 4:08:58 PM
re: Social Media And The Next Generation Of Lending Customers
Thanks, Jonathan. One way that banks can appeal to young people who owe college loans is to tie this in with their careers and help them manage various payments they need to make. A college graduate today, if they are lucky enough to find a job, has a salary, rent (if they are not living with their parents), plus college loans, a large cell phone bill and other monthly payments. This can be overwhelming and cause anxiety. Using social media sites banks can offer tools to help college students or recent graduates with management of their finances.
Jonathan_Camhi
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Jonathan_Camhi,
User Rank: Author
12/26/2013 | 2:44:05 PM
re: Social Media And The Next Generation Of Lending Customers
Good point Ivy. And young people today are already used to managing their loans online because of their student loans. So it's definitely an area where they're used to self-servicing and taking that experience to the next level with gamification is a logical next step.
IvySchmerken
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IvySchmerken,
User Rank: Author
12/24/2013 | 10:41:06 PM
re: Social Media And The Next Generation Of Lending Customers
Another daunting area is applying for a college loan or an auto loan. I suppose lending overall is ripe for gamification.
Jonathan_Camhi
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Jonathan_Camhi,
User Rank: Author
12/23/2013 | 8:10:19 PM
re: Social Media And The Next Generation Of Lending Customers
The mortgage process is a natural place for banks to start experimenting with gamification. If it's your first time shopping for a loan, it can be a daunting process, and like O'Brien said above, there is a need to make the customer feel relaxed and confident about making their decision.
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