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Financial Services Institutions Gear Up for Social Intelligence

Social media has mainly been a marketing effort in financial services, and many firms are not tracking ROI. Yet, some are deriving value from analysis of social data, whether it's sentiment analysis for trading or credit risk in lending.

Financial services institutions treat social media as a marketing and branding effort, but the next phase is integrating social data into business strategy and customer analysis, according to executives at the InformationWeek Financial Services/Dell Think Tank roundtable event on Tuesday.

“The potential for social media across an organization is large, but customers have not aligned their business objectives with their social objectives. They’ve just  gotten rolled up into we have to be on Facebook and Twitter,” said Sean Breen, director, banking practice at Dell Services at the InformationWeek Financial Services/Dell Think Tank roundtable held on Tuesday in New York.

“It’s really important to be aligned with a business strategy, which is when you uncover business value, whether it’s reducing call center costs, or increasing your product development quality, or increasing customer satisfaction. It could be any one of those metrics, so you are just not doing tech for technology sense, but always aligning it with the business,” argued Breen.

Almost half (48%) of the respondents to the UBM Tech survey released on Tuesday said the social media responsibility rests within their marketing organizations. The survey of 300 professionals in banking, insurance, and capital markets found that social media is at a transition point. A minority of financial services firms are starting to explore and invest in the broader concept of a social enterprise to derive “social intelligence” from customer data, the study said.

In fact, a minority of firms have begun setting up “command centers” that enable centralized management and monitoring of social media across the organization, to seek revenue and cost benefits.

At Wells Fargo & Company, social media resides in the marketing department, but the firm is applying it across the business and geographies. “We’re seeing a transition in putting social back into the business,” said Kelli Carlson, VP, social engagement leader, wholesale social strategy at Wells Fargo & Company, who spoke on the “Getting Social” panel at the Financial Services Think Tank (#DoMoreFSIT) live event this week. The bank has an “inside-out” strategy to integrate social across all of its business units and geographies. With 300,000 employees, Wells Fargo has a command center in three locations, with 72 sources coming in where it monitors the traffic.

Recruiting is one area where Carlson sees potential for social media to pay off. The bank is using social media to talk about the new positions or jobs that it has. “There’s a big war on right now in finding the top talent in the financial industry, so using social is going to get us in the forefront of gaining that top talent,” said Carlson.

However, the study found that the typical social media effort at financial institutions is a marketing-led initiative with simple uses and low expectations. In terms of which divisions use social media, 80% answered marketing. Relying on it as a communications tool, 67% of participants listed company news, 49% cited community news, 48% advertising, and 48% announcements.

While financial services institutions are investing heavily in social media, more than two thirds, or 68%, are not measuring the return on investment (ROI), and only half of those respondents intend to create those metrics, according to the survey.

ROI metrics are lacking for social media
The metrics used to track social media results that are easily made available include: the number of followers, comments, and an increase in page views for company sites.

However, David O’Connell, senior analyst at Aite Group, focusing on banking, warned that ROI may be the wrong metric for measuring social media. “ROI tends to have as its audience highly trained finance folks who are skeptical. Many of the benefits from social networking have been very indirect and [it is] hard to achieve them. They are achieved over the long term and they are not readily quantified.” He suggests there should be other quantifiable metrics, such as the number of pricing insights that led to sales per month.

“People look at social and try to measure it in the same way, but you have to give it [a] much longer runway for success,” said Uddipan Bagchi, insurance practice head, Dell Services, on the panel.

Getting social means using the data internally
Financial services firms must use social to attract Millennials as customers, but at the same time they must train their employees and cope with regulatory and privacy issues.
Financial services firms must use social to attract Millennials as customers, but at the same time they must train their employees and cope with regulatory and privacy issues.

Carlson said Wells Fargo is focusing on "return-on-engagement" at this point and not return-on-investment. “We call it social media with training wheels. That’s the approach.” She explained that internally the 99% rule applies. “So, 90% of employees are observing, ready to help with the sale, while 9% are not involved, and 1% are doing something.”

Even if the metrics around social media are uncertain, using social media to engage with customers is still important. “Social media is beginning to have its impact on the business, but businesses are really a long way from being social,” commented Burk Buchler, managing director, social media services, Dell Services, at the event.

“It really starts with understanding your footprint, what are your fans and followers, what is the share of voice, what is the volume of conversations,” Buchler said. “Certainly in the 21st century, those that are really going to succeed are going to be social businesses that are committed to forging deep, meaningful relationships with their customers.”

Although social is being relegated to small PR departments or marketing teams, Buchler said. “I think the potential for technology can be used across the organization, whether it’s recruiting, product development, customer service, or sales.”  

Younger customers expect their financial institutions to interact with them through social media. “It used to be that business was focused on baby boomers and so their way of doing business was different. Now you have Gen X and Gen Y and they are accustomed to a very tailored business. You have to accommodate both areas and now you are seeing a blend,” said Karen Weidman, business development lead, Dell Services North American BFSI Insurance. Noting that women over 50 are the fastest growing group on Facebook, Weidman says insurers have to provide both “face-to-face” and the ability to ask questions and provide immediate responses that social media offers.


Even so, financial services companies are in different stages of utilizing social media. For example, New York Life has a dedicated person who manages the team that posts content every day to social media that is not necessarily about insurance, but about family-oriented issues that are relevant to Gen Y or other groups, said Todd Eyler, research director, Aite Group’s insurance practice, at the Financial Services Think Tank event. “It’s like a safety tip that might be useful to you.” On the other hand, these are early days for social media. Regulatory compliance is a big issue too. “You want to be real-time [with customers], but what can you say really quickly without being tied up with compliance issues?”

Regulations are a top barrier limiting the ability of financial institutions to communicate effectively using social media, according to 46% of survey respondents. Carlson agreed that regulations are holding firms back from using social media and that there are varying interpretations within the bank. “Some employees are blocked from social media because they are regulated.” A couple of technologies can help, such as e-discovery, cataloguing, and storing, but not one financial services organization has it all figured out yet.

Wells Fargo deploys an "inside-out" social strategy
Kelli Carlson (right) of Wells Fargo explains how the bank has integrated social media across all of its business units, while Todd Eyler (left) of Aite Group discusses how insurance companies are using social data to sell more than policies to customers.
Kelli Carlson (right) of Wells Fargo explains how the bank has integrated social media across all of its business units, while Todd Eyler (left) of Aite Group discusses how insurance companies are using social data to sell more than policies to customers.

The industry needs to educate regulators -- FINRA and the SEC -- that social media can improve customer service, said Carlson. Employees also need to be educated. A 20-year-old born with a Facebook account may say, “I write restaurant reviews,” but doesn’t know how to tweet for business.

Institutional trading and asset management have been slow to adopt social media because of information leakage issues, said David Weiss, senior analyst, capital markets, Aite Group, who spoke on the panel. “The notion of firms tweeting their trading strategies is frankly nonsensical to these players.” On the flip side, institutions are consumers of social data for what’s known as sentiment analysis. Some startup technology firms and proprietary trading firms are consuming tweets on symbols to analyze market sentiment. “They are finding some correlation with what they see on public social media networks with stock movement, up or down, sort of moving ahead of the formal PR, company news reports, and filings.”

Detecting credit risk and fighting fraud
David O’Connell, Aite Group’s senior analyst for commercial banking, said there’s “an unbelievable amount of data" on social networks for banks to analyze. He knows of commercial banks that are analyzing social media data to identify credit risk on the lending side. Say a borrower that makes sneakers has reported lower quarterly revenues. “They can use sentiment analysis to figure out if this is as short-term supply issue. Maybe it has something to do with sentiment toward a company’s product, or it’s a bigger problem and it’s a valid credit issue.” The second opportunity to use social networking is for fraud deterrence. When a bank enters a vending relationship, it often involves a number of entities including the borrower, suppliers, employees, investors. Banks are tracking this data to see if through an entity, person, or device there is any connection to fraud. “I know that banks are turning up red flags.”

On the insurer side, the biggest issue is to build up “clearer relationships with policyholders," said Uddipan Bagchi. The only times that insurers interact with their customers is when a policy is sold, when the annual premium is paid, and when someone dies. “It’s not a happy relationship. Insurers are looking to use the social data to sell a broader package of services where insurance is just one element.” For example, when selling an annuity, they can talk about providing services for doctor appointments, how to take care of your medical needs, and larger social needs and bundle in insurance to sell. “This has suddenly opened up to insurers a different set of products they can bring to market.”

However, he knows of various institutions, especially retailers, that are trying to understand the customers’ needs and life events that could disintermediate insurers if they don’t move on social data, he warned. “Retail will own the customer. They will own the relationship. The financial services firm will just be another manufacturer relegated to the background, not owning anything else.”

But Aite’s Weiss cautioned firms about the “creep factor” of the insurer using social data to sell more aggressively to the consumer. “Don’t push it too far, or you run the risk of creeping out the consumer.” Weiss questioned the assumption that social media will alter the relationship with insurance agents.

Despite some of the regulatory uncertainties surrounding social media, panelists suggest the risk of not being on social media is even greater. “A totally new point is that people need to see the risk of not investing,” said Nishi Singhal, director and head, banking and capital markets practice, Dell Services. "If you don’t invest, what's the risk you actually have?”


Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio

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