Social media for financial services – part 5

Does social media have any future as a sales channel?

The reality is that social media is playing a large role when it comes to how people choose their financial services. Hitwire PR carried out research in late 2010 that demonstrated that more than four in ten (43%) of people buy financial services as a result of a recommendation via social networking friends.

These findings help to prove the influence social networks like Facebook and Twitter have on the financial products and services we choose. Surprisingly, financial products ranked higher than other industries. People are far more inclined to choose a financial product or service based on a recommendation than they would clothing (26%), flights or car hire (26%).

One in five people pass on advice about financial services they receive via social media

In addition, more than one in five people said they pass on advice about financial services they receive via social media, potentially overlooking recognised experts for advice on pensions, mortgages, investments and bank accounts.

Interestingly, men are more confident about using a lead they get on a social networking site to choose a financial product than women are. More than half (52%) of men said they had purchased a financial product as a result of advice they had received online, whereas just 20% of women said they had done so.

Money Saving Expert

Just look at the success of sites like Money Saving Expert. It was set-up by financial journalist Martin Lewis in February 2003 with the aim of providing information and journalistic articles enabling people to save money. The site claims to have 10 million unique visitors each month and a large portion of these use its forum to discuss financial products and, in reality, give advice.

For sales, the use of social media in financial services is facing lots of challenges. From the regulatory issues which guide what can and cannot be said by companies, to the pressures of internal risk and compliance. Realistically the best use of social media at the moment is to engage on a common interest. Rather than pushing their brand, products or advice, firms have identified other, often more ‘lifestyle’ issues that they can engage their target audiences on.  Good examples are the blogs on healthy eating and lifestyles from AXA PPP, or from American Express’ OPEN Forum. It supports and engages with businesses about their broader business and management issues.

Engaging on actual product sales and expertise will be trickier. How do you engage people about your products to drive them to a sale in social media setting without falling foul of regulation or internal compliance issues?

New models are emerging

However, new models are emerging. As an example, Zopa is an online marketplace that matches people with money to invest with borrowers who need a personal loan. By cutting out the middleman the theory is that it’s cheaper for both parties. The lender decides how much they want to lend, how long they want to lend it for and the rate of return they want. It’s then up to the borrower to size up the offers and see if they like the look of it.

Next up is eToro, with more than 1.5 million users worldwide, it allows its customers to see who is trading what in real-time, follow the best performing traders and automatically copy what they do. In effect it’s a social trading platform.

These are fascinating new models with lots of potential applications – are they just the first of a new wave of solutions built on a truly social foundation?