Most people tend to agree that the future of financial service exchanges is in a virtual marketplace. What has never been very clear so far is how fast it will happen and who will turn out to be the primary drivers of that switch: the banks or the customers they serve.
A survey conducted by Fiserv Inc. showed 11% of online consumers are currently connected with their bank or credit union through a social site while up to 36% of those not yet connected through those sites expressed interest in doing just that.
The Brookfield, Wis.-based technology provider found that connected consumers use social media primarily “to receive information about financial services” and to engage in relational activities.
Gen Y is the demographic most interested in the convenience of online banking and social media-based interactions, which also means the number of online banking customers is on track for a fast geometric progression type of growth.
Fiserv reports that that 45% of Gen Y consumers expressed the highest interest in communicating with their bank through social media. (Conducted in August 2010 the survey obtained responses from 3,000 consumers representative of the U.S. online population.)
Clearly, Fiserv executives said, “a sizable segment of consumers” are interested in these types of interactions.
Fiserv findings add to other research data showing that as Generation Y--those born from 1982 to 2000—enter the financial marketplace, including the housing market, they will generate demand that is expected to surpass that of previous generations.
For example, according to online marketing expert Kelly Mooney who estimates Gen Y at about 82 million people, 13- to 21-year-olds within this group already influence 81% of their families' apparel purchases and 52% of car choices.
Mooney sees Gen Y as one of the most influential generations for retailers and bankers because it is larger in size and spending power capability even when compared to the baby boomer generation.
Interest for expanded online banking interactions means lenders and servicers need to actively empower their online social media presence and use it to maintain and grow their customer relationships, says Fiserv’s vice president of online banking and consumer insights, Geoff Knapp, because “customers are visiting branches less” and going online more.
More specifically, according to Fiserv, up to 66% of current users of financial institutions’ social media sites engage in receiving information about financial services, 32% use it to retrieve information about offers or promotions and 30% to conduct customer service related activities.
Another 31% of online customers use social media to review other consumers' feedback.
The Fiserv survey reveals that existing customers tend to be more curious and/or inclined to get connected to social media sites of the financial institutions they receive their services—indicating that marketing campaigns of banks and credit unions “should focus on retention and loyalty” first before they target new customers.
Such retention efforts may cater to both consumers who are connected to their financial institution via social media and bill payments, and those who are interested in social media interactions, since they already are “deeply engaged.”
Fiserv found these bank or credit union consumers already use an average of 5.4 services as compared to an average of 4.3 for consumers who have little or no interest in connecting.
Consumers who are not yet connected through social media indicated they would be “more likely to connect to their bank or credit union” through community-building activities such as the ability to read reviews from other customers. Furthermore, about 31% of these customers describe as a barrier to connecting “a lack of awareness,” indicating banks need to improve their marketing and customer outreach efforts to improve the service quality for their online customers.
Lack of awareness was not the only stumbling factor among Gen Y consumers, 45% of which indicated they did not know they could. Fiserv also found that “a preference for using the financial institution's website and privacy and security concerns” was another barrier to connecting.
