The financial services industry and other big social business challenges

I recently carried out a piece of preparatory work on the financial services industry, in particular the Insurance sector and its use of social media. I thought it would be worth writing a blog post to share some findings. Hopefully this is of use to anyone in the same industry/sector. And while the emphasis is on the financial services and heavily regulated industries, I highlight some challenges that could be faced by any organisation so learning could be more broadly applied. A key premise could be “if you can make it here, you can make it anywhere” :) Please share your thoughts in a comment and also any articles or research that you believe do a great job of covering the industry/sector or topics.

I have tried to capture the essence of each main point that I found to have the greatest relevance, with the best articles/reports supporting each and including my take:

Customer engagement and relevance!

This excellent article highlights the need for customers to be provided with a reason to coalesce around communities of interest and why this should be leveraged by marketers. Martin Hill-Wilson suggests that wealth or financial management is a common human concern and a great opportunity to engage for those that provide services in the industry/sector. In relation to this he covers the need for companies to act as one across often disparate and silo’d customer-facing departments: marketing, customer service, sales, etc. He also covers the need to start internally as I have before (and indeed this recent research from Celent reports – Collaboration and Insurance 2.0: An Overview of Social Software and Enterprise 2.0 for Insurers, registration required), empowering employees to serve customers better and more cohesively. He suggests that customer service employees are often in a cross fire (or piggy-in-the-middle as he puts it) between the internal and external agendas that brands seem to find so difficult to effectively align and this needs to be resolved. I agree with the need to find relevant themes or content, especially for subjects which normally have a high barrier to engagement (i.e. people are not generally inclined to converse and connect around financial or insurance topics and will probably only do so when they need it). Adding value around those themes and content is a big challenge but there is potential. Added value that will keep customers coming back but more importantly, that will make their lives better in terms of how they manage their wealth (simplifying issues is an especially good opportunity in my view). Doing all this should result in high customer engagement levels, increased sales, recommendations and sharing amongst friends – propagating the value. Alexander & Strunk Insurance epitomise this approach with their line “To advise you on insurance, not just sell it” and they are doing a pretty good job with social media too. Blue Shield of California finds that social apps and rewards (gamification) engage its employees in wellness programs and sees potential for its insurance customers. I think there are also many other factors to consider which are probably best addressed in a separate blog post but for now here are a couple of slides I put together that cover some other key, related considerations.

Some other excellent reference links which I think provide related insights/considerations should also be read. This article on customer journey mapping – a prerequisite to successful customer engagement I would say. This article on content marketing around social content. Finally this great overview of how P&G is transforming around social business.

Dion Hinchcliffe does a great job of tackling the big hairy issues this type of industry faces around business strategy, compliance and regulatory issues. A point explored is that many financial industry firms fundamentally make their living by profiting from information scarcity. “The idea is that they have more information than the market does as a whole and can profit from the arbitrage created by the disparity between those-in-the-know and the know-nots. This then, at its root, more than other “difficult” industries, often puts the business strategies of financial services in sharp contrast – direct opposition even – with the basic premise of social media, which essentially says that the most productive and useful conversations are ones that are the most open, transparent, shared, and participatory.” The anathema that social media represents a foreign way of operating for financial services firms thus provides the first big challenge, i.e. the ability and willingness of financial services firms to change the way they do business in a changing digital world. I think very important for this challenge to be overcome is for the industry to see things in terms of what they might gain through effective customer engagement – see first article points. In terms of compliance and regulatory issues and overcoming these, Dion suggests cultivating and maintaining a healthy social media policy lifecycle that’s enforced in close concert with legal, HR, and compliance as a key strategy for success. Alternatives are to automate the compliance process – see next article.

Standardising and automating compliance through social media compliance platforms

This article is really a case study on how Northwestern Mutual, a US Insurer, standardises its compliance efforts related to the social networking activities of its more than 6,000 FINRA-registered representatives who use LinkedIn, Facebook, Twitter and Google+. They use a tool from Hearsay alongside other Insurers, e.g. Farmers Insurance Group, Thrivent Financial for Lutherans and California Casualty. Northwestern Mutual use the full suite of Hearsay Social, an enterprise social marketing platform, for:

• FINRA/SEC compliant infraction monitoring, capturing, archiving and Rogue Page Finder
• Single sign-on (SSO), LDAP directory integration, and integration with CA Site minder and HP Autonomy to deliver security, compliance, ease of use and scale
• Scheduling posts and campaigns across firm, business unit, and individual employee profiles, business pages, and timelines
• Social CRM to enable a deepening of customer relationships
• Social Analytics enabling the user to roll-up metrics on social media profiles across the company

I think these types of technology and activity are increasingly likely to make adoption of social media by insurance firms easier and less risky, thereby facilitating broader adoption. They may also go a long way in assuring standard firms although the one note of caution I would add across the board is that these technologies and activities should strive not to hamper or dampen the kind of spontaneity that are so crucial to social technologies.

Are insurers and other financial services firms in danger of their lunch being eaten by the social networks?

A view in the latest of a Gartner series of reports (Top Industry Predicts 2012: Industries Face intensified Consumerization and Technology Disruption – covered here since its a paid for report) cites “radical shifts in customer behavioral changes and buying habits… challenging many industries to reinvent their product development and sales and services processes to align with customer expectations and technology use.” They predict that “offering insurance products to their communities would be a natural extension of social media providers’ financial services strategies and would allow them to capitalize on their extensive set of information they constantly collect about their users.” Is this all far-fetched prognostication or is there a grain of possibility in the disintermediation of financial service firms to include, for example, the enablement of online debt management services and peer-to-peer loan pools, all of which happens by way of social networks more than by stand-alone web sites? I don’t see it being too implausible. From a brand point of view, in the same way traditional brand extensions such as Virgin or Tesco selling financial services have worked here in the UK, it could work the other way. But social media providers becoming financial services powerhouses may be some way off, especially since trust is fundamental for a brand extension into a non-related field to work (and social media providers are not paragons of trust). Facebook and the like may not become better at providing insurance services to customers than an insurance company itself, but it could become the social front-end with the back-end outsourced to a partner insurance company. To stay competitive, traditional banks (Gartner cites Citibank as the leader here) have launched services that reach their customers through Facebook, and enable them to conduct transactions through a social network rather than a Web site. Considering that a lot of experimentation and activities by firms are already taking place on the social network, financial transactions cannot be far behind. This all points to some very real possibilities on both sides in my view. Image reference.