Power of social media needs no elaboration. It’s a revolution in the communication system where everybody irrespective of his or her location is tracked in real time with information, education and entertainment.
It has virtually networked the world communities into a small global village where social changes have become order of the day. Its power is so immense that it has facilitated even specially-abled persons (deaf and dumb) to speak in real time.
Over a period of time, the use of social media platforms in the governance system – be it political, bureaucratic or corporate governance, is growing as an authentic communication channel with the stakeholders.
In other words, social media platforms are fast getting official status as a means of communication. Needless to mention that it has revolutionized the world of marketing & advertising where customized messages are beamed to a target group in a most convenient way.
Here, the reach of social media merits a mention. According to an American Bankers Association Research study, worldwide 3.2 billion people use social media, which is about 42% of the population.
About two-thirds of adults are on Facebook; that’s more than 2.32 billion active users a month. The study reveals that 90.4% of millennials, 77.5% of GenXers and 48.2% of Boomers embrace social media, spending an average 2 hours 22 minutes a day on social media and messaging.
Today, social media is not just an entertainment tool for the younger ones. It is not just a platform for dishing out opinions, arguing with strangers and sharing photos and videos. In fact, the platform has now matured into a serious business tool providing an opportunity to garner more business for less.
The premise is simple, social media throws a wide range of opportunities where businesses cast a wide net to ensure their reach to a broad audience with their campaign. Not only this, it has become an effective tool for users to research products and services. So, it makes sense for businesses to board the platform with fervor and gaiety and use it to fish customers.
Indian corporate world, including national and international brands, are fully engaged in using social media to reach the users with their products & services and have been successfully conducting business transactions over the platform. However, the scenario around the banking industry in the country is not encouraging. The banks are not taking full advantage of social media to widen their reach to a large and fast-growing mobile, online and socially connected audience.
There is a significant rise in availability of data about the persons on the internet platform. The data is captured while registering on online portals, making purchases, and downloading apps or signing up for reading material. The availability of the huge data bank on online platforms is a rich resource to track individuals’ behaviour, intent and most importantly, their financial wellbeing.
Speaking particularly in the context of banks, the social media channels like Facebook, Twitter, LinkedIn etc are the credible sources of knowing about the persons’ behavior, intent and reputation. Let me share an incredible story of the year 2005 when there was no social media platform. A recovery suit and publishing of summons in newspapers against an ‘untraceable’ loan defaulter and his guarantor failed to recover the amount locked in the bad account. However, it was the power of the internet which nailed the defaulter to repay the outstanding amount pending against him.
The bank officer took route of internet search engines and located the ‘untraceable’ defaulter employed with Microsoft Singapore as Sales Analyst. Similarly, the guarantor was also traced in Bangalore working in IBM as Sr. Architect IT. In the first instance, both the defaulter and the guarantor denied having taken any loan from the bank. But they immediately owned the liability when the bank officer revealed to explore the recovery of the outstanding loan amount from their current employers. Finally, the defaulter paid the outstanding loan amount.
Since 2005 we have witnessed the emergence of powerful social media tools driven by the internet where everyone is keen to mark his/her footprint. But social media remains under-used for productive initiatives as it remains more confined to private use than professional use.
Banks can make use of social media in a professional way by integrating it into their credit appraisal systems. It can even become part of the Know Your Customer (KYC) process. Notably, the increased influx of social media even in common man’s lives has created a significant data bank not only about them, but also about the people associated with them.
For example, it’s an era where young men are applying for a loan and we have a huge population of these young ones who are a new-to-credit segment. Banks have been using traditional methods of assessment of the credit-worthiness of a person. In the traditional way, the credit footprint and strong credit history is a must. So, the new-to-credit face a lot of difficulties in getting their loans approved.
Since banks are pursuing their mission to expand their reach, they have to come out of the traditional narrow criteria of assessing the credit risk of loan applicants. Here they can lay their hands on the social media handle of the applicants to measure their behavior and the circle in which they are operating.
For this, the banks need to invoke powerful data analytics and artificial intelligence tools to analyze a person’s social media activity to measure his/her lifestyle, as well as income and spending patterns. While browsing the data of prospective borrowers, their network of ‘friends’ can be analyzed in terms of their credit profiles and the data can help the banks to make a credit decision.
It’s notable that the traditional credit scores often leave out a lot of individuals from the radar and many even fail to get credible scores despite having creditworthiness. So, it’s the social media handle which can be used as an alternate or parallel credit scoring model to gauge the creditworthiness of customers.
There may be banks and financial institutions using Internet to track social media behaviour to check the credit-worthiness of their customers, but it is done as an unofficial activity. The need is to let banks make use of social media as an official tool to assign a credit score to gauge the reputation as well as creditworthiness of their customers. Even defaulters can be chased and made to repay their loans. Once officially implemented, the banks would also be able to get rid of negativity spread on social media against them to a large extent.
Meanwhile, banks are currently capitalizing on the popularity and reach of social media by marketing their products and services, and also using it as a communication channel for feedback and reactions.
There are some studies which show that communication through social media strongly influences the brand image of a company. It’s through social media platforms that banks can make their customers feel that they are friendlier, more real and more gracious towards them.
However, we are yet to see a model in banks, except a few banks, where they embark upon social media as one more channel allowing customers to conduct financial as well as non-financial transactions.
The banks need to have a system in place where they link accounts of customers to their social media accounts and allow them to make standard transactions like fund transfers etc. This will be another grand step to fuel customers with the power of technology.
(The views are of the author & not the institution he works for)
DISCLAIMER: The views and opinions expressed in this article are the personal opinions of the author.
The facts, analysis, assumptions and perspective appearing in the article do not reflect the views of GK.