CHAPTER-I
INTRODUCTION
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EFFECTIVENESS OF SOCIAL MEDIA IN BANKING SERVICES
BACKGROUND OF THE STUDY
The banking sector in India is undergoing massive transformation as far as digitization is concerned. With most banks in the country already reaping the benefits of core banking system, they now feel the need to take their banking operations to the next level. While market competition is prompting them to promote their products and activities through different channels, they see customer engagement as the key differentiator. Toward this end, many banks in India are using social media to increase customer engagement and satisfaction.
Around 90 per cent of daily transactions are executed electronically today. Institutions that hold on to the belief that physical branches remain at the core of what the brand does, will not adapt easily to the customer of tomorrow who rarely visits a branch. There are two major factors at work here in creating a behavioral change, namely, the psychological impact of the information age and the process of diffusion of innovations.
Each of these factors contributes to creating a paradigm shift in the way banks need to think about the service and engagement of customers. Internet, ATM and iPhone applications have become more and more popular channels. This is where Web 2.0 and bank 2.0 can be joined. Also due to the rise of WEB 2.0, it can be observed how the traditional role of banks is slowly changing. In the world of social media, customer preferences for products or services are influenced by ideas, perspectives, insights and experiences provided by other users. This is achieved through peer reviews, referrals, blogs, tagging, social networks, online forums and other forms of user-generated content. This study aims at sorting out the concept of mass media and pointing to the role that social media play in the process of long-term and beneficial bank – customer relationships as well as improving the effectiveness of the organizational structure.
NEED AND RATIONALE
Information Technology’s advancements are revolutionizing every business and financial firms and especially the development of financial services in banking industry. In the late 2000s world witnessed the phenomenon where online networks became the bridge for global interactions through "sharing" and "following". Inspired by the power of social media to engage users in virtual relationships, organizations began seeking ways to immerse into "people’s internet "and learn to leverage the "likes," "shares and "comments" for profit making. Nowadays it’s common for every business to create a Facebook or twitter account to create and bring their clients and customers closer, observers speculate that its interactive nature are more than suitable to support relationships between organizations and their consumers. Bank services are much different than selling or promoting products, the social media can be used to announce new services, guidelines on how to use these services and advertising. Like branch banks there are service providers and helpers present as one of the page’s administrators. Customer satisfaction always described as having active interactions between clients and banks and therefore their engagements will define the satisfaction. This paper addresses the role of social media in providing customer motivation in using banking services. The goal is to offer insights on why banks should consider the use of social media as a marketing tool to motivate customer and how banks which used this tool has brought them closer to the goal of customer satisfaction.
Social media interactions provide banks with a platform to reach out to their customers and deal with issues in real time, which increases both the quality of their service and the levels of consumer trust. With banks now able to track each customer relationship through social media analytics, social media data can be integrated into a broader customer intelligence strategy to help banks gain a customer centric understanding of their products, services and brand as a whole. Social media is a potential channel for managing effective customer relationship management for retail banks.The adoption and use of digital channels, such as mobile phones and social media, has grown rapidly over the last decade. To reduce their cost of operations, they are adopting social media to market their products and services. This trend is accelerating the adoption rate of social media marketing by retail banks across the globe.
SOCIAL NETWORK AS A MEDIUM
Out of a number of social networking platforms, only a handful of platforms can boast of a wider public reach in India. Even amongst these handful few, the choice of platform to use often depends on the purpose of use. The table enlists the top four platforms used in India and characteristics of each of the platforms.
Social networking platforms and their characteristics Name of platform Number of users (India) Characteristics of platform
Facebook 71 million Predominantly relationship-driven
Twitter 33 million Predominantly content driven
Linkedin 20 million Skill driven
Google + 2.85 million Predominantly relationship-driven
SOCIAL MEDIA IN BANKING SECTOR
The banks which do not use the social web might be missing their biggest opportunity to connect directly with customers before their competitors do. Social media marketing can not only increase the reach of a bank but also have a positive influence on how customers perceive the bank’s brand value. Customers do not use social media to buy products or services but to build relationships. In consequence, banks should focus on building a relationship based on mutual trust through real involvement in providing precious resources and information. This type of activities contributes to improving the perception of a brand by means of positive social marketing. The properly chosen strategy of using social media in banking requires understanding customers’ expectations.
USE OF SOCIAL MEDIA
Before implementing social media in bank services, the first step to understand its potential use and effectiveness. The values of using social media is
1. Accelerated awareness – social media can always be used to generate rapid awareness through customer base by announcing and advertising in the network, driving the much needed awareness to notify the new services and products.
2. Deepen Customer Relationships – By having a strong and well-executed social network community, customers affinity will be grown and improve thus attract new and present customers to use social network inturn reducing costs for customerservices. Engaging in customers relations and involve them in several topics to get feedback and improving the services.
3. Foster Innovations – As understand by observing communities, customers themselves will promoting the bank and suggesting improvements for new ways to solve problems, communicate even in bank’s close hours. This can also be a problem collecting and analyzing the data but the pros especially the feed backs will accelerate the service improvement leading to more customers’ satisfaction.
4. Drive transactions – Using social networks specially forums can make a ground for discussing new transaction tutorials for customers, people can talk and learn new ways and trade fast and simple by using these methods.
PURPOSE OF THE STUDY
The project is based on analysing the effectiveness of social media for banks in the Indian scenario. Most of the literature review is based on European and American markets where the concept of using social media is quite common. The research is based on capturing primary data from the customers about their perception of using social media for banking services. Different technological, cultural and demographic factors will be analysed in the study.
PROBLEM STATEMENT
With the customer’s satisfaction in the main goal of every bank the situation of improving and innovating through social networks is a question. The social media provides new opportunities, paving way for innovations the banks as most important financial firms needs to put it in their top priority. Even so banks would express their concern over the lack of safety and security regulations in social media networks. Some banks remain much skeptical towards social media, stating concerns over information privacy, lossof control over .The entertaining aspect of online social media often clashes with the serious nature of banking business, and thus marketing via social media could be a risky strategy in the efforts to establish relationships with clients. Hence the main motive of the paper is to study the impact of social media in effectiveness of financial services.
CHAPTER-II
LITERATURE REVIEW
LITERATURE REVIEW
Goodhue, D. L., & Thompson, R. L. (1995). Task-technology fit and individual performance. MIS quarterly, 213-236.
The author developed The Task Technology Fit model, which says that IT is more likely to have a positive impact on performance and be used if the capabilities of the IT match the tasks that the user must perform (Goodhue and Thompson, 1995). The task technology fit model will in this paper be used as a tool to analyze if the technology of Facebook is fit for delivering traditional service challenges. The task technology fit framework looks at the tasks that should be performed, together with the characteristics of the technology, and whether the utilized technology is fit to perform or assist the particular tasks.
Marketing theories have identified four characteristics of service deliveries. They are referred to as intangibility, inseparability, heterogeneity and perishability, and will be looked at in this paper. As Facebook is a relatively new phenomenon, the medium itself will also be analyzed. In order to do so, the media-richness model, which classifies mediums after cues they provide, or in other words, how rich the medium is considered to be, will be utilized. This model will be used in order to explain the technology aspect of the task-technology fit model. As no research exist on how a bank uses Facebook, these theoretical assumptions will make up a new model appropriate for the purpose to analyze the fit of banks using social media.
The main offerings in this paper Banking trends(Roman 2003) is that the main offerings of banks are the interest they offer on savings, and what they charge lenders. Though, heavy competition exists, forcing banks to offer similar prices on savings and loans. What this entails for banks is that non-price factors such as customer service become more important. Financial services are also complex, and often a challenge for customers to understand. This leads the customers to rely on trust toward the bank and the bank’s representatives for proper advice.(Roman, 2003).
Social Media C4(SMC4)Social Media Capture, Control, Communication and Compliance(Michael Veenswyk,2013).
Social media is going viral in the banking industry, it is becoming a preferred choice for customers to contact and communicate with banks, and is becoming expensive for Banks to control and respond quickly and compliantly back to customers.However it is a risk for Banks to use Facebook, Twitter, LinkedIn, Google+ and other Social Media tools due to SEC, NASD, FSA and FINRA regulations that govern the use of Social Media specific to ‘Advertising, Supervision, Approval and Record Keeping’. This paper talks about various security measures and software applications that are useful for the banks.Parallel with the growth of importance of social media there is the growing interest of banks in ways of applying creative and productive abilities of internet users.
Kuchciak, I., Yang, H., Wang, M., Lo, M. C., Songan, P., Ramayah, T. & Ng, T. How Social Media will Change the Future of Banking Services.
Social media is a huge opportunity for brands if they learn to influence the collective wisdom of the crowd to be able to build a significant and defensible market position based on solid social acceptance. The purpose of this paper is sorting out the concept of mass media and pointing to the role that social media play in the process of long-term and beneficial bank – customer relationships as well as improving the effectiveness of the organizational structure. Special attention will be paid to possible applications of Web 2.0 as a form of looking new the banking sector.( Iwa Kuchciak,2013)
Palmer, A., & Huo, Q. (2013). A study of trust over time within a social network mediated environment.
The banking sector is more heavily regulated than many other industries, and whilst technology is a key driver for banks to ensure competitiveness, orchestrating a strategic approach towards social media has been pushed back for a number of years.(Adrian Palmer N.K.L,2009).The banking industry has fallen behind in its approach to this new form of media, but there are now a range of successful examples of how banks can benefit from carefully planned social media engagement programmes.
Social media interactions provide banks with a platform to reach out to their customers and deal with issues in real time, which increases both the quality of their service and the levels of consumer trust. With banks now able to track each customer relationship through social media analytics, social media data can be integrated into a broader customer intelligence strategy to help banks gain a customer centric understanding of their products, services and brand as a whole. This report covers the usage of social media in retail banking in various countries across the globe.It provides information on social media penetration globally, as well as social media usage by various banks in different countries.It also covers the technological advancements which enhance social media in the retail banking system.The report also features key developments in social media in developing markets such as China and India.( PR newswire,2012)
With the growing adoption of smartphones and the simultaneous surge in Internet use across the globe, banking and finance institutions (BFSI) are looking to invest in social media platforms to engage existing as well as prospective customers. This according to Wissam Khoury, MD of SunGard Financial Systems in the Middle East. According to Khoury, the use of social media to build and maintain relationships with customers is a trend that BFSI can no longer afford to ignore.The idea is simple, these trends encourage information sharing across the organisation, its channel and customers and due to the surge in Internet and smartphone use across the globe, not leveraging social media, Internet and mobile banking, is risking being left behind and losing out to a competitor.
Many banks focused on studying what drives the customer satisfaction and evidently the results were interesting, they observed that customers are reaching out more often to their bank through social media, looking for assistance, asking a question or providing feedback (Jason Kincy 2012) these studies lead to identifying several key performance indicators that impact overall customer satisfaction. The most important factors derived from fast response times, using same channels as customers to reply and offers to assisting with further problems if any. While delivering an effective resolution to the problem is priority, the method of solely through social media channel can be difficult, there is always in need of expert and talented service associates to work with customers by using a telephone contact for instance in the favorof customer satisfaction.
In the beginning of the new decade, many banks focused on studying what drives the customer satisfaction and evidently the results were interesting, they observed that customers are reaching out more often to their bank through social media, looking for assistance, asking a question or providing feedback (Jason Kincy 2012) these studies lead to identifying several key performance indicators that impact overall customer satisfaction. The most important factors derived from fast response times, using same channels as customers to reply and offers to assisting with further problems if any. While delivering an effective resolution to the problem is priority, the method of solely through social media channel can be difficult, there is always in need of expert and talented service associates to work with customers by using a telephone contact for instance in the favorof customer satisfaction.
Berthon, P. R., Pitt, L. F., Plangger, K., & Shapiro, D. (2012). Marketing meets Web 2.0, social media, and creative consumers: Implications for international marketing strategy. Banks and financial institutions are behind the curve when it comes to using social media as a communications tool. They are catching up, but there is still a high level of uncertainty regarding how to best utilise it. When it comes to external communications, the banking industry is characterised by confusion over regulatory responsibilities as well as concerns about the loss of control when interacting with social media platforms(K.Hermkens,2012).Social media is a potential channel for managing effective customer relationship management for retail banks.The banking industry has acknowledged the potential of social media, and banks are increasingly stepping up their social media activity. What is important now is the correct guidance and an expert understanding of how to navigate a complex social media landscape, what rules to follow and where to prioritise time and resources.(Gavin James,2012). Many consumers view financial services as complex, thus a service that needs pre-purchase information and evaluation. Because financial products are viewed as being complex, they are also high-involvement products.Banking products should be differentiated from competitors with different strategies.
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CHAPTER-III
RESEARCH METHODOLGY
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3.1 INTRODUCTION
Research methodology specifies the methods and procedures needed for acquiring the information for solving a problem. It is based on a descriptive analysis of the data. The instruments used for collecting information will be a set of structured questionnaires, which will be used to study different factors like demographic profile, exposure to technology, psycological factors and awareness of the market trends.
The research conducted will be divided into two parts:
Primary data:
Structured questionnaires will be developed to capture the various factors that inflence the customer behaviour while using social media for financial services
Secondary data:
Secondary market data would be obtained from research articles, published journals and other reports.
3.2 STATEMENT OF THE PROBLEM
Social media is always refered with entertainment aspect it is far from the serious nature of banking business yet social media provides huge opportunity to establish superior business delivery to its customers. It helps in innovation as financial needs of the customer can be prioritised and products can be developed accordingly. Still banks are concerned about safety and security of the information shared and feel it would lead to loss of control of the information shared and privacy aspects. The research helps to analyse the customer perception of using social media for financial services and tries to identify how effectively banks can leverage on this to enhance their busines.
3.3 VARIABLES OF THE STUDY
1. Dependent variables:
Impact of social media in the effectiveness of financial services
2. Independent variables:
The impact of following variables will be studied in the research:
‘ Demographic factors (age, gender, education level, annual income etc)
‘ Frequency of usage, no.of hours using social media
‘ Spending and investment pattern of the customer
‘ Employment status(student, salaried,business)
‘ Cost and convenience aspect
‘ Level of technical expertise
‘ Security issues and concerns
3.4 OBJECTIVES
1. To identify the impact of social media in financial services with special reference to banking sector
2. Basic idea of customers attitude towards social media banking
3. To analyse the key technology trends for customer relationship management
4. To understand the future potential of effectiveness of social media in banking
3.5 HYPOTHESIS
Based on the objectives the following hypothesis have been identified
Hypothesis1: The use of social media for bank’s services will have positive effects in helping and guiding clients with the new services and user-friendly atmosphere
Hypothesis2: The use of social media has been effective in controlling expense cost in communication engagement with customers and presenting the services
Hypothesis3: Demographics and technical expertise play a huge role in customer’s perception about effectiveness of social media
3.6 SAMPLE POPULATION
The sample population will consist of active internet using population of Bangalore and Chennai. Determination of sample size will be done based on proper statistical estimations where an approximate sample size of 100 to 150 users will be preferred.
3.7 DATA ANALYSIS TOOLS
Various data analysis tools and techniques like multiple regression, correlation, chi-square and anova will be used to extract the factors that could be attributed to effectiveness of social media.
3.8 PILOT TEST AND RELIABILITY
The questionnaires which are to be used to collect responses from the respondents will be subjected to vetting and reliability tests by experts before using them for the research.