SINGAPORE--Asian banks have been slow to adopt social media and are lagging far behind their peers in the United States, according to experts at a panel discussion on the impact of social media in the financial industry.
The panelists, which include social media experts and financial services professionals, were speaking at the Asian Banker Summit here Tuesday. They also noted that financial institutions in general currently lag in the adoption of social media.
Asian financial institutions are further behind their Western counterparts, said Neil Katkov, senior vice president and head of Asia for research firm Celent. Citing findings from a September 2009 study, he said Asian banks accounted for less than 1.9 percent of all financial institutions on Twitter. In comparison, U.S. banks accounted for 72.2 percent, Katkov noted.
In the study, German banks made up 6.6 percent of overall banks on the microblogging site, followed by Canada at 3.4 percent, Australia at 2.3 percent, France at 2.1 percent and the Netherlands at 1.9 percent, he said.
However, Douglas White, founder of Prosperity Research, noted that while the U.S. led in the adoption of the platform, the study findings could project a false perception that it is easy to go on to social networks.
Katkov noted that financial institutions might find it tough to deploy social media due to the lack of IT funds. Budgets set aside for IT department are shrinking as these resources have to be justified along with other departments, particularly, during last year's financial crisis, he explained.
He added that the banking industry is still a conservatory sector and still lacks innovation. While adopting a conservative approach is good for risk management, this is not the case for social media platforms, he said.
Developments on social media can turn quickly and banks need to react just as swiftly, for example, in order to properly manage the company's brand and reputation, Katkov explained.
Banks are also not agile enough, he said.
While some banks, especially those in the United States, are putting a lot of investments into social media, they still have not figured out the best strategies and business practices, he added.
Need to prepare for Gen Y
According to Dan Bognar, vice president of financial services at Oracle Asia, financial institutions will be left behind if they fail to understand this new business model as they risk ignoring a potential clientele, Generation Y.
A report by Pew Internet Research found that social media is now an integral part of Gen Y's lives, as this generation moves away from blogging and toward social networking sites.
Bognar said financial institutions themselves have admitted they do not have a business strategy for Gen Y. Banks have noted that this customer segment does not yield significant profits and has not reached a critical mass to represent a strong brand proposition, he said.
However, Bognar pointed out to a research that predicted Gen Y, by 2017, will surpass both baby boomers and Gen X to become the biggest spending group.
He noted that while Gen Y might now own simple banking products such as savings and deposits, financial institutes will need to be prepared to move these customers through the banking product lifecycle.
An IDC study early last year, though, said banks in the Asia-Pacific region were increasingly tapping new media tools to attract Gen Y users.
The research firm said banks in the region were placing greater emphasis on online banking and mobile banking services and expanding their focus on new media tools, including online videos, blogs and social networks.