New technologies, ethical considerations and the rise of social networking will dramatically change banking industry dynamics, says Gartner.
According to findings by the research company, social banking platforms will continue to grow and take hold in the retail lending and financial planning areas. This growth will be spurred on by investments in financial social networks and increasing consumer interest.
Social banking is the combination of social trends, such as green practices, social entrepreneurship and peer-to-peer lending and financial planning via social networks, with banking products and services.
"More consumers are generally spending more time on social networks, which increasingly form part of consumer purchase processes for new products and services," says Alistair Newton, research VP at Gartner.
First National Bank recently unveiled an interactive Web site in an attempt to attract users onto its new online community. The site provides financial information to its users and features Web 2.0 tools such as blog posts, multimedia videos and discussion forums. Standard Bank`s interactive portal, The Achiever, uses rewards, a wiki, blog and a fictitious character to engage with its target youth market.
Gartner states social banking will initially take off in areas with a developed banking market and widespread adoption of broadband and potentially wireless communication systems.
While SA has a strong banking industry, broadband access still remains a barrier. However, the move by non-bank competitors to cater for the unbanked population could see strong growth of social banking.
"Social banking will emerge first where societal cultures have high levels of acceptance for social welfare, and potentially where the underserved or unbanked client segments need capital and market access," says Stessa Cohen, research director at Gartner.
Changing strategies
The research company states that although social banking will not change the consumer banking model immediately, retail banks will need to understand social media, financial social networks and microfinance better and adapt their services accordingly.
"What has become clear from the growth of social networking as a phenomenon has been both its speed of growth and the viral impact of such communities. Ideas are picked up, established and disseminated within short time scales, much too short to allow late entrants to the market to take advantage of the opportunities that will arise. Banks need to be positioned to take advantage of this shift to a new age of social banking," notes Cohen.
Banks should first create a social media strategy and ensure they have the technology required to implement a social banking model, says Gartner. Rather than trying to build their own social partnerships between retail banks and social-banking providers, networks should be created.
Gartner also advises banks to plan for greater transparency on pricing and service in the organisation and use this transparency to compare pricing with that of competitors.
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