Game-Changing Social Strategies for Financial Services

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lithium.com | © 2014 Lithium Technologies, Inc. All Rights Reserved

Lithium social software helps the world’s most iconic brands increase loyalty, reduce support costs, drive word-of-mouth marketing, and accelerate innovation.

Lithium helps brands to build vibrant customer communities that:

contents

1 21st Century Banking: Disruption, Defection, Extreme Expectations

4 Public Social Networks for FSI? Ineffective and Unpredictable

5 Own It, Don’t Outsource It

6 Customer Communities are Trusted Social Hubs

8 The FSI Social Advantage: Lots of Customers

9 Innovation as Game-changer: Barclaycard, FICO

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Recent fundamental changes in the financial services

marketplace have put the entire industry to the test. Trust

is at an all-time low, cost pressures are at an all-time high,

technology has exploded across mobile, digital, and cloud

apps; regulators are invasive (to say the least), and top line

growth is elusive at best.

Financial Services remains the least trusted industry globally

Source: Edelman Trust Barometer

Importantly, because customer engagement—and

subsequently, the customer relationship— happens at the

point of transaction, financial service firms increasingly find

their influence over the customer relationship waning. Not

so long ago, all transactions happened in the branch and we

still see legacy customer engagement strategies focused on

branch activities—which is now wholly out of step with how

customers want to engage. Eighty-nine percent of customers

search the web before they buy and 67% search the web

before making a service call.

Further, more and more financial transactions now take

place through disruptive competitors like Moven and PayPal,

rather than traditional banks. As they do, these disruptors are

increasingly taking over a larger portion of the transaction

pie. This means they’re also taking over the customer

relationship, and with innovative experience design, radically

transforming customer expectations. The bottom line: Just

as they are for just about every other industry, banking

customers are transacting more and more online with

disruptive brands who operate fundamentally new business

models. And they’re interacting less and less with the more

traditional, location-based company agents (eg: bank tellers).

21st Century Banking: Disruption, Defection, Extreme Expectations

Source: CameoWorks

There are now 1 billion mobile banking users globally

1,000,000,000

95%of all customer

interactions in retail banking will be digital by 2020

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What’s more, FSI customer expectations are now driven not

by branch or online experiences with competitors, but by the

high standard of service and experience of the best online

companies. According to the Forrester Consulting Report,

FSI—Claim the Customer Experience Advantage, 66% of

consumers experiences from some companies raise their

expectations for experiences with all other companies. Your

biggest competitor may very well now be Amazon.

There’s no more skirting the fact that the location of the

customer experience is now online, and the owner of the

relationship is now the customer. They decide when, where,

how often, how much, and what services and products they

want; and they now compare the relationship they experience

with their bank to those they have with consummate

experience leaders like Apple. The bar has been significantly

raised. Consumers demonstrate every day that they aren’t

going to settle for less.

Yet many banks have responded to the mass migration

to digital channels by investing in even more in branch

transformation projects. They still believe customers value

in-person contact with company representatives most when

they want advice or to purchase new products and services.

What they have failed to understand is that like all other

purchase journeys today, the FSI buyers’ journey is not linear.

It involves a lot of research online before ever setting foot into

a retail location. Today’s customers consult websites, online

communities and with their online social networks for real-

world insight and advice before ever interacting with brands

they may purchase from.

Forward-thinking financial services firms recognize they

must find a way to reclaim the customer experience and own

the customer relationship while still providing a personal,

humanized connection. Increasingly, they’re turning to social

media for the type of differentiated customer experience

innovation they need.

transactions

datarelationship

FSI competitive set is getting complex

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Though banking has certainly not led the social charge, some

FSI firms have ventured out onto LinkedIn, Facebook, Twitter

and Google+, with the assumption that these are the best and

only places to be. Not so.

Just 2% of customers who like a brand on Facebook ever return to the page

Source: Social Media Today

While these social media giants are popular, for customer

engagement they remain ineffective. For banks that operate

within the confines of regulation, they’re also unpredictable.

Third-party sites like these make frequent changes to policies

and the user experience—all of which are outside your control

making them risky. Third-party post regulations (with complex

adopt and entanglement issues to navigate) make the public

nature of mainstream social media sites thorny when it

comes to interpreting guidance. Banks rely on disclosures

on their social media profiles as a key preventative action,

but there hasn’t been enough precedent to determine if that

alone will hold up under examination.

There is also the issue of being unable to predict where

consumer attention will go next. Many forecasters once

predicted that Facebook would not only dominate all social

networks, but the entire web, eventually becoming the new

corporate web site. Indeed, that has not come to pass and

likely never will as evidenced by waning teen interest in

Facebook and the huge growth of new sites such as

Pinterest and SnapChat. The place to be on social media

today almost certainly will not be the place to be tomorrow.

It’s essential that financial services firms not concede their

entire digital strategy to Facebook—or any other single

public social network.

Public Social Networks for FSI? Ineffective and Unpredictable

42% of teens considered Facebook the

most important social network in 2012

33% of teens consider Facebook the

most important social network in

2013—a decrease of 9%

Source: Media Bistro

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The emerging key best practice is for financial services firms is

to have an owned property at the center of their social strategy.

Yet many just fold their social initiatives in to existing business

processes as a new channel—an important and influential

new channel perhaps, but a channel nonetheless. They get a

Twitter account and a Facebook page and start tracking channel

successes like fans and followers. They cheer as the channel

successes pile up, but eventually someone starts looking for the

business success. Sadly, because they’ve adopted a channel-

centric view of social media, very often no one can point to a

single dollar saved or earned.

Smart businesses today realize that while social media might

be another channel, an owned, on-domain social hub is a

collaboration machine—a mechanism for matching talent

and knowledge with those who need it. They create online

customer communities that give people with problems instant

access to those with solutions. They create engaging social

customer experiences that motivate and reward contribution.

They develop knowledge bases where service questions and

product solutions are owned, codified and easily accessed by

anyone in need. And they make and/or save multi-millions per

year in the process.

The simple truth is that your customers aren’t looking for

you on Facebook. If they’re passionate about your brand and

passionate about your products, they want to go to a place

where they can find and interact with others like them. It’s your

job to create that place. Facebook and Twitter are fantastic for

reach and to broadcast messages, but your own social base

camp is a must-have. It’s the only place you can engage your

customers, capture their social conversations, develop new

insights, and innovate on the social customer experience.

Owned properties are far easier to manage and customize.

They give you the advantage of being able to create truly unique

social experiences for your customers that they will identify

with your brand and not, well, with Facebook. You can create

a unique social customer experience that gives customers a

way to connect with each other—and, all within the framework

of FSI communication compliance. Connection is what your

customers want, and it’s what you want. Because when you

connect your customers with each other, social sharing begins

and a vibrant customer community full of service, passion, and

innovation follows.

Because customers trust each other more than they trust

you, those who are passionate about your brand will generate

more positive influence for you than your PR firm ever could.

They want to create and curate content around your brand and

products themselves. They want access to trusted resources

(each other), and they want to hear what other customers have

experienced. They want to problem solve together (which, by the

way, means your customer service load goes down—way down).

When you create an authentic, transparent place for them to

do this, you start relating to them in a way they understand and

value. It’s a win-win for all.

Own It, Don’t Outsource It

MyFICO community members spend 41% more on FICO products.

The Barclaycard Ring community generates $10mm in annual benefit.

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If we give our customers free reign, won’t the squeaky wheels

get all the attention? A common concern.

Yes, but they are already saying bad things about you. Isn’t it

better to listen and be part of the conversation? Absolutely.

Here’s why:

1. There is no better source of feedback and ideas for

improvement than the criticism of your customers. You

should be encouraging them to tell you what they don’t

like as well as what they like.

2. When customers do have negative comments, it is

exponentially more powerful to have other customers

come to the defense of your brand rather than your

customer service team.

That’s why customer communities are the beating heart

of social strategy—they put trusted content at the core.

Trusted user-generated content (UGC) is thought leadership

by credible subject matter experts from your brand—your

customers. Because customer communities drive real

engagement, they are fast becoming the new must-have

corporate asset. A vibrant social hub filled with UGC sets

you apart as the trusted resource for your customers—and

no industry needs to build that trust more than financial

services. For your brand to become the go-to place for

information, learning, and discussion, social conversations

must brought into the mix and used for problem solving,

brand evangelizing and loyalty inspiration—all the key drivers

of social engagement.

Communities are also a key element in crowdsourcing, a

prime resource for customer opinion and a place to develop

and test new products. When you own the property, populate

it with trusted content, and facilitate community engagement,

social customer relationships become a vital part of the

brand identity, not just another communication channel.

Customer Communities are Trusted Social Hubs

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Do customers want to be “friends” with their bank? It’s

a question many financial firms wonder as they witness

the popularity of other brands on social media networks.

“Friends” may be a bit strong, but customers absolutely do

want to have a trusted relationship with their bank. More

importantly, they want access to other customers. They want

a place to belong, a place to interact, and they want that place

to be full of trusted information.

All this said, another common concern for FSI firms around

social media is the fear that consumers won’t talk about

finances in a public forum. The truth is that consumers find

FSI products complex and intimidating to purchase and use.

They want to be better informed—independently—so they are

more empowered before engaging with an advisor or agent,

yet they are reluctant to discuss their finances with friends

or family. Online communities are perfect places for FSI

customers to gather information from others like themselves

in an anonymous setting. In the My FICO customer

community, for instance, customers routinely share their

actual credit scores (clearly a sensitive topic) in order to gain

more insight and advice on how to boost them.

The key to having a community in a highly-regulated

environment, where privacy must be strictly protected, is to

create a place where customers own the decision to join the

community, as well as determine their level of engagement

and interaction within that community. When you own your

social media property, you can customize it to provide security

and privacy options that meet compliance while at the same

time respect your customers’ individuality. Creating rules

of engagement for interactions helps to keep community

members (and staff) mindful of how a financial services social

community differs from other social media sites, including

their own familiar usage of Facebook.

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One of the built-in advantages financial services firms have

when it comes to social interaction is a large customer base.

FSI communities can scale quickly, provide relatively high

interaction, and deliver “big data” insights on consumer

behavior, opinion, and needs.

An error some firms make is seeing social strategy as just

another channel. They enhance the user interface on their

current website, create a few mobile apps, Tweet promotions

or bank events and call it a social strategy. But to leverage

the full power of social and meet the extreme expectations

of today’s consumers, financial services firms need to

see social as a transformative business strategy; not just

another communication or marketing channel. Social is

the new expression of the heart and soul of business, and

must be at the center of all business functions, including

risk management, compliance, marketing, operations, and

training. In other words, social needs to become the way you

do business and not just the way you keep in touch with

social customers.

Because customers have become used to best-in-class

social brands like Amazon and Uber providing ease of use,

convenience, and connectedness, they now extend these high

expectations to their financial service providers. Customers

want the power of shared information. They want data that

makes them smarter and they look for that in customer

communities every day.

Consumers today basically want to engage with “The Bank of

Me”—one that precisely meets their unique set of customer

expectations. Forward-leaning FSI firms are responding

to that need by creating personalized, adaptive, responsive

social customer relationships. Make no mistake, this feat

requires a a major mind shift such that banks must:

1. create one single vision of the customer.

2. empower frontline employees with access to data

on every customer.

3. facilitate and train staffing to be responsive in real-time.

4. provide the same high-level service experience at

every touch point.

This shift creates deeper engagement with customers no

matter where they’re located. And lest you think that the

traditionally conservative financial services industry will

always be a social media laggard, the wheels are in motion.

The rewards of leveraging the power of social in financial

services are not temporary. This is how business of the future

will exist—now is the time to grab the lead.

The FSI Social Advantage: Lots of Customers

9 out of 10 financial service companies now use social media and their focus is shifting away from generating awareness to community engagement.

Source: PeopleLinx

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By now, most financial services firms have realized that

unless they innovate, they’ll die. Not only have the last several

years proven that innovation is king in business model

reinvention, but that it’s also critical in rebuilding trust among

consumers. Consumer expectations for smooth, responsive

online interactions, service, and community; the fast pace of

innovation in financial data aggregation, payment systems,

and alternative banking services—all this disruption leaves

you with little choice. Reinvent and innovate. And do it now.

Traditionally, firms have hired consultants, conducted

market research, and formed committees to determine what

customers want. Today, they can do it far faster and simpler: by

building customer communities and tapping real customers.

Customer communities where customers engage, interact,

and provide feedback help banks create products, services

and modes of delivery that align with what their customers

truly want and need. Communities are excellent at crowd-

sourcing R&D with their much larger pool of ideas, concepts

and feedback than any outside R&D firm could possibly offer.

Case in Point: Barclaycard Ring

BarclayCard tapped the power of the crowd—their card

members—to help build a better credit card experience. They

launched an online community, encouraged members to

exchange ideas and vote on product features by giving them

“credits” for participation. Today, we have Barclaycard Ring—

the world’s first crowdsource-designed credit card. Because

the pool of ideas offered by community members was much

larger than any internal or consulting team Barclay’s could

have assembled, it launched with unprecedented features.

The Ring card is an enormous differentiator for Barclaycard,

setting it a world apart from the competition. Take a look

at what Barclaycard Ring card members get. Notice how

radically different it is from anything you’ve experienced from

a credit card company in the past.

Barclaycard Ring Member Benefits:

1. Full transparency—insight into how Barclaycard Ring

makes money, including metrics on Ring’s financial

performance.

2. Continued influence over the offering—a chance to

guide Ring’s benefits, rates, rules and penalties through

an idea submission and peer evaluation system.

Innovation as Game-changer: Barclaycard, FICO

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3. A share of Ring profits—including options to donate

profits to community-chosen charities.

4. A robust social experience—topical forums, ask-and-

answer, idea-sharing, polls, blogs, and credits earned

for community participation.

What was the first thing Barclaycard did right? They

approached social as a potential collaboration machine, not

as just another channel. This unique and innovative initiative

has delivered a 50% decrease in complaints and a 25%

increase in customer retention—an annualized benefits of

over $10MM.

The moral of the story is that social offers a good deal of tried

and true benefits, but it’s also a place where we are free to

re-think our customer relationships entirely. Barclaycard

approached their Ring customers not as sales targets, but as

potential partners in the business.

The rewards of innovation are not one-sided. Customers

engage deeper and commit to brands when they feel their

opinion matters. Passionate customers bond with other

customers, who in turn, bond with the brand. Innovation

in how firms relate to customers – beyond new products,

services, and user-interfaces – transforms customer

experiences so that they have a relationship with the brand.

This increases loyalty—and in a day when it’s easier than ever

to switch banks, loyalty is critical.

Case in Point: My FICO

Not only can innovation in community drive value and loyalty,

it can also drive business growth. Lithium worked with the

Fair Isaac Corporation, the creator of the famous FICO score,

to build the My FICO customer community. As the volume

of trusted content and user-generated content has grown

to 20,000 posts, the company has experienced significant

increases in search engine optimization. Nearly eight million

posts are read per month and 39% of the search traffic to

FICO.com consists of users landing on URLs in the MyFICO

community. The community is now a major driver of the

top of the sales funnel activity for FICO products such as

credit reports and credit monitoring services. The company

reports that customers in their third year after community

registration spend 41% more on FICO products than

customers who are not community members.

Innovation is key to meeting customer expectations, but it’s

also essential for brands to thrive. Social communities create

connection, conversation and most importantly, remind

consumers and companies that at the end of the day, it’s

people and the way we relate to each other—not technology—

that empowers us. Social strategy is not an add-on, but fast

becoming a game-changer for FSI firms who do it right.

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About Lithium Technologies: Lithium social software helps companies unlock the passion of their customers. Lithium powers amazing social customer experiences for more than 300 iconic brands including AT&T, BT, BestBuy, Indosat, Sephora, Skype and Telstra. The 100% SaaS-based Lithium Social Customer Experience™ platform enables brands to build and engage vibrant customer communities to drive sales, reduce service costs, accelerate innovation and grow brand advocacy. For more information, visit lithium.com,or connect with us on Twitter, Facebook and our own community–the Lithosphere. Lithium is privately held with corporate headquarters in San Francisco and offices across Europe, Asia and Australia. The Lithium® logo is a registered Service Mark of Lithium Technologies. All trademarks and product names are the property of their respective owners.

1. McKinsey & Co

2. Lithium-commissioned Forrester Report: FSI Firms—Claim the Customer Experience, Now!

3. PeopleLinx