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Impact of Social Media on the Financial Services Industry

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Impact of Social Media on the Financial Services Industry:

In today’s age everyone is well aware of the significant impact that social media has had on our lives in the way we communicate, socialise, conduct business and view the world. This case study however, will attempt to narrow the scope of this theme, by looking specifically at the way in which social media has influenced the financial services industry.
The evolution of social media has facilitated a change in the nature of the relationship between institutions and consumers within the financial services sector. Not all of these changes have, however, had a positive effect on financial institutions. Media convergence and the growth of user-generated content has blurred the lines between different platforms of media, and the distinction between producers and consumers (Australian Communications and Media Authority, 2011). Social media outlets such as YouTube provide a platform for individual users to become producers by distributing content that can be viewed anywhere in the world. As a result, anyone with an internet connection has access to more knowledge and information than any time previously in history. This has impacted the financial services sector as non-mainstream media platforms are increasing awareness of the risky and often corrupt practises of financial institutions, particularly within the banking industry.

For example, Peter Schiff, an American stockbroker and CEO of Euro Pacific Capital, has used social media to broadcast his radio show through a YouTube account that now has over 35 million views (Schiff, 2016). Through this channel he has made available a speech he gave to mortgage bankers in late 2006, just before the Global Financial Crisis of 07-08. In this speech he describes how America’s housing market was propped up by risky sub-prime mortgage loans that had been given false aaa credit ratings (Grey, 2013). When these mortgage loans failed, not only did the housing marketing collapse, but the entire US economy. The video below highlights this speech.

Peter Schiff is just one of many individuals using social media in order to help spread awareness of the dangerous activities of banks and what the average person can do to help minimize their own personal financial risk.
Another impact that social media has had on the financial services industry has been through the provision of new financial services, as well as a change in the way in which marketing is performed by financial institutions. With the popularity of Facebook rapidly rising in the last decade, more and more online apps and services offer the option to create an account using your existing Facebook account. For example, when signing up to Storify in order to publish this case study, I was given the option to sign up using my Facebook account (Storify, 2016). Thus it should not come as too much of a surprise when the Turkish bank ‘DenizBank’ decided to capitalise on this trend by being the first bank to offer a service where their customers can make transfers and manage their bank accounts through a Facebook app (Eldridge, 2016).

However, as users are able to control more and more aspects of their lives through their Facebook accounts, the question has to be asked as to what potential privacy issues could arise from services such as DenizBank’s Facebook app?
Despite users having control over their privacy settings, Facebook in many respects can be considered a public forum (O'Reilly, 2013). Banking has on the other hand always been an understandably private and guarded activity. These two services may seem mutually exclusive, however, through the introduction of new communication technologies the lines between the previously distinct public and private spheres have become increasingly blurred (Cassidy, 2016). In the 2011 publication “15 Minutes of Privacy”, the authors claim that “… users of Facebook acknowledge the privacy risk associated with Facebook use but confess to an inability to react, either because they do not possess the necessary technology knowhow to manage privacy settings” (Zizi Papacharissi, 2011, p. 83) It is thus easy to see the risk in merging banking with social media. However, in order to address these potential security problems, Dilek Duman, the Executive Vice President of Information Technologies and Support Operations at Denizbank, assures its critics that “when logging in to our branch at Facebook, there is the OTP (One-time Password) application. Even if the Facebook information of the user is acquired, log in is not possible without the OTP. All our customers can use the Facebook application with no hesitation” (DenizBank, 2012, p. 2). Regardless, it is expected that the tend of merging financial services with social media will continue through the provision of new, innovative applications.

Social media has also changed the way in which financial institutions can approach marketing and engage with their customers. Specifically, twitter has been shown to be a personal favourite of banks when looking to connect with their customers using minimal effort to achieve maximum reach. Citibank is one of the best examples with a twitter following of nearly 350,000 and a unique approach to social marketing (Citibank, 2016).

As the tweet above illustrates, Citibank’s marketing strategy is to proliferate content that has little if anything to do with the services they offer. This allows the company to create conversations and engage with a range of users who have little interest in banking and are not direct customers of Citibank. In doing so, the company is able to promote themselves by simply providing a platform for everyday communications without having to directly plug their brand (Brown, 2015). However, this social media strategy could be looked at from a number of different angles. Firstly, as previously mentioned, since the GFC of 07 the banking industry has been a frequent target of heavy criticism through both mainstream and alternative media channels. Thus the approach to social media taken by Citibank and other major financial institutions could be seen as a clever marketing tactic in steering the conversation away from banking in order to avoid negative publicity in the comment sections of their posts. On the other hand, it could simply be that banking as a topic is considered boring by most people and thus it would be beneficial for banks to steer clear of content directly discussing banking when trying to maximize their social media traffic. Either way, it is undeniable that social media has become an integral part of the marketing strategies of financial institutions.
This case study has demonstrated the way in which social media has influenced the financial services industry. Alternative media channels have provided everyday users the opportunity to bring greater attention to the corrupt and risky practices that banks undertake. In addition, the evolution of social media has led to the provision of new online services by financial institutions, such as the first FaceBook banking app introduce by DenizBank. Social media outlets such as Facebook and Twitter have also changed the way in which institutions engage with their customers, and approach their marketing strategy. Overall, as social media continues to infiltrate our daily lives expect the financial services industry to continue to find clever ways to utilise it for their own benefit, and to steer the conversation away from consumer concerns and criticisms.

Works Cited

Australian Communications and Media Authority. (2011). Media Convergence and the Transformed Media Environment. Retrieved from Australian Government: http://www.alrc.gov.au/publications/3-media-convergence-and-transformed-media-environment/media-convergence-and-transform-0
Brown, N. (2015, March). The Impact Of Social Media In The Financial Services Sector. Retrieved from Social Media Week: http://socialmediaweek.org/blog/2015/03/the-impact-of-social-media-in-the-financial-services-sector/
Cassidy, E. (2016). KCB206 Lecture 3.
Citibank. (2016, April). Retrieved from Twitter: http://twitter.com/citibank
DenizBank. (2012, January). The First Facebook Bank Branch of the World from DenizBank! Press Release. Turkey.
Eldridge, R. (2016, January). How Social Media Is Shaping Financial Services. Retrieved from World Economic Forum: http://www.huffingtonpost.com/richard-eldridge/how-social-media-is-shapi_b_9043918.html
Grey, B. (2013, February). Standard and Poor’s Credit Rating Agency Charged With Fraud in Sub-Prime Mortgage Ratings. Retrieved from Global Research: http://www.globalresearch.ca/sp-charged-with-fraud-in-mortgage-ratings/5322037
O'Reilly, D. (2013, November). The private information Facebook now makes public. Retrieved from CNET: http://www.cnet.com/au/how-to/the-private-information-facebook-now-makes-public/
Schiff, P. (2016, April). Peter Schiff's Official YouTube Channel. Retrieved from YouTube: http://www.youtube.com/user/SchiffReport/about
Storify. (2016). Retrieved from http://storify.com/
Zizi Papacharissi, P. L. (2011). Fifteen Minutes of Privacy: Privacy, Sociality and Publicity on Social Network Sites. In L. R. Sabine Trepte, Privacy Online: Perspectives on Privacy and Self-Disclosure in the Social Web (pp. 75-89). Heidelberg and New York: Springer.…...

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