Social Media in Financial Services – A Theoretical Perspective

Abstract

Social media steps over traditional outlets to offer faster news delivery sprinkled with opinions, commentary and perspectives on business activity. It has become the need of the hour for financial services organizations to set a policy concerning social media. Getting it wrong could mean significant reputational damage, ignoring it could mean being left behind. Those financial services institutions embracing social media are better able to pick up on customer complaints circulating in the online world, and respond before reputational damage occurs. Clearly social media is about socializing in communities online. Social media is collective rather than monologue. Many people talking to many and being able to do so when they want, where they want, and how they want. Connecting through emails, blogs, wikis, web, video and photo sites, social media isn’t necessarily about going to a particular place. It's more about coming together and networking and connecting in a new, more equal and progressive way. To be ‘best able to connect’ means to move toward a sophisticated, responsive distribution mindset. To be where people are and to participate in a way that speaks to them directly. To do that means to be in people's personal environments – Facebook, MySpace, Linkedin, Twitter, etc. Ignoring the power of online word-of-mouth is no longer an option in today's interconnected world. The ability of consumers to influence corporate behavior and impact business planning in unanticipated and, at times, unwelcome ways has grown exponentially. One ‘entertaining’ complaint from an irate customer going viral can escalate into a full-blown crisis in less than 24hours. In this environment, understanding what customers feel, think and say about company – in real time – is ever more critical. Financial services companies need to harness the great power of social media in order to enhance customer service, manage their reputation and obtain a competitive advantage. Social media humanizes customer service, brings businesses closer to their stakeholders, and makes information more accessible.