The financial services industry has been noticeably quiet amidst the furore surrounding the explosion of social media. A new report by credit agency, Experian, has issued stern warnings for those still trying to ignore the phenomenon.
Research from Experian highlights the reliance of young people – dubbed the “Facebook Generation” — on social media and, more pertinently, the way it has forever changed how they interact with businesses at every level.
Tor Bengtsson, Commercial Director at Experian UK & Ireland, said: “Social media makes young adults better informed, more able to share grievances and more open to influence from peers and financial providers than ever before. They want immediate information, instant decisions, faultless customer service and the ability to manage finances on the move. Providers that fail to tick all these boxes could fall behind.”
It’s not a question of “could”, however. Many providers have already fallen behind. Paul Say, First Direct’s head of marketing, recently said: “Social media is a challenging environment especially for old-fashioned banking organisations who are having to break down the barriers to conversation.”
Out of the options available to them, many providers have simply chosen to bury their heads and avoid creating a robust digital media strategy that addresses the challenges of the social media landscape. If this has yet to cost the dearly, it will.
According to Experian, the Facebook Generation’s preferred way of interacting with business isn’t going to change. “Social as a way of life won’t just disappear when they get older and it’s only likely to get stronger,” it says.
While some financial businesses prepare to flounder, others are seeing the truth in the old adage of necessity being the mother of invention. In January 2013, the government’s Retail Distribution Review will come into force.
Designed to increase the visibility of costs to consumers, the result of the Review will be that independent financial advisors will charge a fee to clients rather than receiving commission from financial services companies.
The net effect of this will be that those that cannot, or will not, afford the fees of an IFA will seek advice elsewhere. The government has already made a pre-emptive move in the establishment of an online money advice service.
IFA fee or no IFA fee, it seems that consumers are already turning their backs on traditional sources of advice. A recent survey carried out by econsultancy.com found that 97.09% of people questioned said that their buying decisions are influenced by social groups.
The Experian report also highlights the importance of the immediate social group. It claims that 58% of young people turn to friends and family for financial advice, with just 18% consulting banks or building societies.