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When working with the big banks and insurance companies, as they embrace the potential of social media, their adoption of change can be fairly slow. The highly regulated (and risk averse) financial services industry often lacks the appetite to engage in online social conversations and (they could argue) “why do we need to?”. The answer is that, if you don’t, then you get left behind. There are competitors and some new entrants already building a successful social media presence.

As an example of a new entrant, in the banking sector, I’ve been following Zopa for some time. It started in the United Kingdom, and promotes itself as the first marketplace for social lending. This means that members of the Zopa community lend and borrow money with each other, sidestepping traditional banks. The premise is that both lenders and borrowers get better rates, because Social Lending is more efficient than traditional banks, which, with large overheads, must take bigger margins on the money that passes through them.

With over 400,000 members, Zopa appears to have hit upon a successful formula, and one that is now being copied in other countries, such as Prosper in the US, Smava in Germany and Boober in the Netherlands

And because it has empowered their online community, it becomes natural for it to add the social media features that further enhance its proposition, such as frequent blogs and online conversations between its members.

Time will tell whether this business model will be successful and sustainable. But it demonstrates that a new entrant into the marketplace such as Zopa can shake-up an otherwise cautious banking industry, and maybe move them faster towards embracing social media. It’s going to happen – it’s simply a question of when.

Read all our posts about social media for financial services

I have just typed “How do I” in Google today, and the fourth suggestion that it proposes is “…delete my Facebook account.”

There’s clearly some discontent out there. What’s the cause of these rumblings? Well, it was reported last week that there has been a significant review of security policy at Facebook HQ. Facebook user profiles are publicly accessible by default, and it seems that a growing number of commentators such as Jason Calacanis, chief executive of the question-and-answer website Malaho, are calling for a boycott of what is now a “not trustworthy” site.

And yet, this is against the backdrop that Facebook will shortly announce over 500 million users, and that’s 40% of everybody on the internet.

So, the dichotomy for businesses that have online security as a top priority, such as in the financial services or pharmaceutical industries for example, is how they should engage in social media when Facebook, the most popular of social media tools, is so open. And this question is always most loudly voiced in the Boardroom of the banks and insurers, where the decision-makers for a social media strategy will be immediate detractors because they consider the simple equation is “Social Media = Facebook”, and they can see no further!

The important resolve at the Boardroom must be that the social media strategies for banks and insurance companies should not focus upon social media tools. Instead, the message for the Boardroom is that the best uses of social media will demonstrate that it can yield amazing results without compromising security or the confidence of your customers. And to achieve this it can be better to think of more creative ways to engage people. We’ll be looking at some of these in the coming weeks.

Read all our posts about social media for financial services

It sometimes feels as though parts of the financial services industry are in the grip of a social media frenzy, with a keen anxiety to “do something”. We’ve written before about why tactics such as “We want a Facebook page” are not a social media strategy and will not, in themselves produce long-term engagement and benefits for the brand. Sometimes Facebook as a presence is right for your brand and what you are trying to achieve, but there are some great examples of financial services organisations being more creative in their use of social media.

One such example comes from the US and is AXA’s My Retirement Shop. Rather than just trying to engage customers in their brand or products they are offering a real service. They are meeting their own business objectives, engaging a defined audience and also providing them with a service and an enhanced brand experience over and above their existing transactional relationship. It is one of many ways that financial services firms can make themselves relevant and also engaging. For many consumers insurance is not an engaging topic, but by adding this additional service to them it can become so.

We see many examples like this, particularly coming out of financial services firms in the US and increasing adoption of them in the UK and Europe. Brands moving from just using social media to engage customers in the brand, to providing a real service and value to them. Of course for many brands, a combination of both as part of a coherent and ongoing social media strategy would be the best option.

Developing these solutions comes best from a thorough review of why a financial services organisation is using social media in the first place. At FreshNetworks we work with clients, though our social media workshops, to identify the overall business aims that social media can help with and the best audiences for the business to target. Then we figure out what will bind the audience as a community and hence encourage them to participate.

It’s not necessarily all about Facebook. And it’s not necessarily all about engaging with your actual product or service. When you are using social media to engage customers make sure you focus on your business aims and target audience, and then be creative about the tactics you use.

Over the past few months, I have consulted with around 20 banking and financial organisations, and I have got “under the skin” of their frustrations with, and their aspirations for, the untamed beast that is social media. In this series of posts I will outline the opportunities for financial institutions when entering into an online dialogue with customers in a risk-averse industry. I will look at why the answer isn’t simply a Facebook page and Twitter feed, but instead it’s about identifying and engaging with an online community that has a shared interest and the passion to get involved. There are some great examples (often from the US), and some not so great, that will enforce my argument.

Let me start by challenging the convention that financial organisations benefit from a Facebook fan page. It can help, of course, but the benefits are usually overstated. There is consensus among my clients that simply looking at the volume of Facebook fans flatters to deceive. If this was simply a numbers game then Facebook would win every time. So, instead, let’s look at the quality of the fans, not the quantity. Many of the Facebook fans that have been gathered by the banks and the insurance companies are employees of the organisation using the channel as another route to keep in touch with their business and each other. And, in general, the Facebook fans from the target audience (i.e. the prospective customers or existing customers) are generally inactive, and certainly more inactive than conventional Facebook fan sites.

The Facebook dilemma was nicely summarised by a comment on mashable recently as follows:

FaceBook taught its members that the social media platform was for socializing… not for purchasing. The wrongenvironment for business! The argument of ‘Be where the people are’ does not always apply. I have been to funerals with a lot of people but that does not make it a good place to market. FaceBook is packed with members who are there for one purpose only… to interact with friends and families. The fastest way to get me to de-friend you is to try and sell me something!

For this week’s instalment in our series of online community examples we turn to the financial services industry.

Online communities in the financial services industry

There’s no escaping the fact that the financial services industry has been hit hard by the current economic climate. But like any industry at the moment, now is a great time to innovate in the way financial services companies communicate with and engage their customers. There are some really informed examples of social media by financial services brands and below are three great case studies of online communities in the industry from around the world.

Royal Bank of Canada Next Great Innovator

Since 2007, the Royal Bank of Canada has been running the Next Great Innovator Challenge, an online competition for university and college students across Canada to suggest an innovation for the financial services industry. The competition runs on an online community site that invites those taking part to submit their ideas, and to comment on and vote for those that others have submitted. This turns the competition into an example of real consumer co-creation. Allowing consumers to work together with each other to suggest and refine ideas that will change the financial services industry in Canada.

The online community also performs a number of other functions. It is a way for the Royal Bank of Canada to share its ideas and information about innovation, business change and the financial services industry. They are using the challenge as a way to reach those often turned-off by discussions about financial services (university and college students) and then engages them through the online community. This site is a great way of getting new ideas into the business, engaging an often difficult-to-inspire audience and also to build relationships with people who will potentially be valuable customers to the bank in the future.

HSBC Business Network

The HSBC Business Network is an online community for both customers and non-customers, allowing businesses and entrepreneurs to share information with and gain information from their peers. It is a good example of brands using online communities to provide a service that compliments and enhances their existing product portfolio. Here they are providing business advice and networking opportunities, not something that HSBC has previously offered on this scale, but something that it is very possible for them to do using online communities.

The site has gathered over 1,000 members since the start of 2008, and like any peer-to-peer advice and support community it’s value will really depend on the growth of its member base and then on these members being active in the community itself. The forum areas are currently popular and active and reflect both ongoing business and entrepreneurial concerns (such as how to manage staff) and topical talking points (cash collection in the credit crunch). It would be great to see these grow with time and also to see how HSBC use the resource they have created.

Online communities in the financial services industry offer a great opportunity for peer advice and support to be combined with expert commentary from the organisation itself. Leveraging this expertise and mixing it with user discussions and comments can be a great way for the organisation to grow and build the size and value of the community, position itself as an expert in the area, and to learn from (and with) its consumers)

Wesabe

Wesabe is a money-management site and online community for people who want to share advice about personal finance decisions. It combines the kind of money-management tools you get in Quicken or Microsoft Money but adds a social layer on top of this.

Users can add tags to their frequent purchases and become a ‘fan’, ‘user’ or ‘captive’ of the service or product. They can find other users in a similar situation and share advice and information with them to help them improve their financial decision-making. The social media element of the site also allows peer-to-peer financial advice, tips and information. And this is shown as relevant based on each users own situation and information they have entered into their profile.

Wesabe is a great site and a great example of adding a social layer to an existing service. Money management tools are useful from an organisational perspective. By adding the social layer and letting people in similar circumstances find, interact and share advice with each other the site becomes a lot more useful. It stops being just an organisational tool and starts being a real service that they are gaining from.

As with the HSBC example, this online community shows how using peer advice and support can be successful for organisations in the financial services industry. Online communities offer a way for people in similar situations to find each other and  to support each other. Whilst you might not know somebody personally in the same situation as you, an online community can help you to find them and then for you t o help and support each other.

See all our Online Community Examples

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Last month, First Direct, an online bank in the UK, launched an online community, Little Black Book. Like British Airway’s Metrotwin, the First Direct online community is designed for customers to share recommendations and tips. Both of these sites rely on the concept of recommendations from ‘people like you’, be that other people who fly the same airline, or other people who bank with the same bank.

For First Direct, the site is a way of building a sense of community, as Jenny Southwell, their Head of e-Marketing at First Direct, said when it was launched in November:

We place the customer experience at the heart of everything we do, and with the internet remaining such a fundamental part of our business, it was important for us to embrace new methods of creating value for our customers. Little Black Book is a way for us to give something back other than through direct banking.

There is a definite benefit of building an online community that capitalises on any peer relationships that may exist. People do trust ‘people like me’ and so emphasising this relationship can only help to create the community feeling and bonds that are one indicator of potential success.

The evidence from First Direct’s Little Black Book is also that members like this kind of personal recommendation community. The community only launched in late November and already has 17,000 registered users according to Mark Mullen, Head of Marketing at First Direct. This is more than 1% of all the bank’s current account customers and is certainly a successful start to this online community project.

I’ll be watching how the community develops and would be interested to know how many of these 17,000 registered users become regular, active users of the site. Whether, long term, they will continue to feel that the other members of the community are ‘people like me’ and so continue to gain benefit from the site.

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Some more reading

• Personal Touch: Engaging through social network
• Banking buddies? The limits of how far brands can tap into social networking
• First Direct launches social networking site
• First Direct launches user-generated content site
• first direct bank: when social means business