Social Media and Banking

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Banking and social media

INDEX
* Introduction- pg 3-11
* The why and how of social media w.r.t banking- pg 12-24 * International and Indian Examples of social media- pg 25-28 * The grey side of social media usage- pg 29-30
* Suggestions- pg 31
* Conclusions- pg 33-34

Introduction
Social media and banking do not seem to have a strong relation at the first look on the topic, but are indeed complexly related in today’s world with the continuous evolution of the banking sector and the huge impact of social media on the masses. While today many international banks are using social media as a connectivity and marketing tool with its customers, Indian banks are also not far behind. ICICI, one of India's biggest banks, already boasts a Facebook app allowing clients to view their account details, check statements and upgrade their debit card, among other activities, but still maintains a cautious attitude to social media strategy. While there is no doubt that social media is all the rage amongst retail and advertisings sectors, it is yet to make major inroads in the financial services and banking sectors. A new report from Ovum, the technology arm of market analyst firm Datamonitor reveals that a majority of banks worldwide aren’t yet ready to embrace social media. Privacy and Data Security are two of the biggest hindrances to mass-scale social media adoption in the banking sector. Moreover, many banks do not think social media gives them an edge to engage customers. In fact, they believe that it’s a dangerous proposition which may compromise sensitive financial data .Startling as it may seem, the recent Ovum research indicates that 60 per cent of the world’s retail banks have no plans to use social media in the future. There are noticeable exceptions though – UK’s First Direct, Australia’s NAB, Wells Fargo in the US and Rabobank in the Netherlands have adopted social media as a communication channel. While American banks mostly rely on Twitter, Australia’s NAB used YouTube and Twitter to pacify disgruntled customers after its online banking system fell over. And going by the encouraging response received so far, the move appears to be fetching the desired results. 14 per cent banks currently use social media as a marketing tool, with a further 12 per cent planning to use it to promote their business by the end of 2012. Some challenges which the sectors might face are as follows: The banking sector relies on sensitive financial data all the time. Though Facebook has made several changes to its privacy norms over the last couple of years, a lot more needs to be done in order to simplify who gets to see what information. Perhaps, a different set of privacy controls for banks and financial institutions would help. Given the current situation, it’s unsurprising that most banks prefer Twitter over Facebook as the former has virtually no privacy vulnerabilities. The Ovum report indicates that social media offers a massive untapped opportunity for financial institutions. Consumer confidence in the banking sector has hit an all-time low and a personal touch of social media would serve as a perfect shot in the arm to lift the struggling global financial industry. Before we plunge into this fast deepening relation between social media and banking, let us first understand some basic concepts about banking and social media separately. Banking

Under the Central Government Act,
Section 5(b) in The Banking Regulation Act, 1949
(b) " Banking" means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise;

In general, a bank is a financial institution and a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly by loaning or indirectly through capital markets. A bank connects customers who have capital deficits to customers with...
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