Traditional financial institutions that want to compete with fintech disruptors like Chime and X (formerly known as Twitter) need to up their social media game. This means a significant contribution in terms of budget and resources from the marketing department.
Demographically, half of the U.S. population will soon be comprised of what’s known as “digital natives,” those born after 1989 who have lived their whole lives immersed in technology. Today’s bank leadership teams and customer bases are skewed heavily toward the “digital immigrants” born before 1989, and this has allowed competitors to jump ahead on building trust with the explosive “natives” half of the market.
Take a look at Chime. The neobanking application with 15 million users reportedly spent $80 million on marketing in 2021. Based on the industry rule of thumb for marketing spend of 1/10th of 1% of assets, this is the same amount a bank with $80 billion in assets would need to spend to get the same bang for the buck. Yes, that’s a lot of Benjamins.
Here are examples of how some organizations have made use of social media to achieve results:
A smart social media marketing plan will identify the target audience, the end goal, the tools that can contribute to a successful outcome, and the metrics that will be used to measure success.
Target Audience – BecauseGen X and Boomer generations are the demographic least likely to switch where they bank, financial institutions must target younger, digitally native Millennial and Gen Z consumers with their social media efforts.
End Goal – While the digital natives will not bring large deposit balances to help with current liquidity challenges, they do bring active payments accounts and growing borrowing needs. Banks need to think of these households as the seeds of future larger relationships and set clear goals for household growth and engagement in this segment.
Metrics – Platforms such as Hootsuite and Google Analytics can track just about every movement a user makes when interacting with a post. KPIs an institution will want to track to measure results include:
Tools – Banks are yet to fully leverageInstagram, YouTube and TikTok as the platforms that harness the most traction with Millennial and Gen Z consumers. Instagram is a great platform for developing a consistent visual brand, and YouTube, with the most widespread demographic of users, can be strong for advice and educational content. TikTok, the newest and most candid platform, is useful for posting roughly edited quick takes directed primarily at Gen Z, but beware – content that looks corporate or feels like an ad on TikTok will simply be ignored.
A major transformation that has come along with the widespread use of social media is “social search,” or the use of social media as a search engine similar to how Google has been used over the years. Gen Z users prefer social media as their primary search engine. One study found that roughly 48% of people have used social media to determine where to go out to eat. Consider how this behavior could expand to a search for other services, including a company to meet their financial needs.
Financial institutions considering social media marketing should consider collaborating with “finfluencers,” or financial influencers. This new type of celebrity has harnessed a high following on their social media accounts and earns money by teaming up with brands to make more seemingly authentic advertisements to consumers.
Finfluencers have become extremely popular on Instagram and TikTok and are changing the behavior of young people looking for financial advice. In fact, 90% of people following a finfluencer reported having changed at least one of their financial behaviors. CashApp has done highly visible and shared work with influencer Jimmy Darts to promote the use of its product.
Banks looking for the next wave of growth need to think differently about what marketing really means to half the population these days, and a key first step is to increase their social media investments and make significant improvements to the playbook they use to engage and influence the best customers of tomorrow.
Gonzo note: Hats off to the Cornerstone interns of 2022 and 2023 who helped build our firm’s research in this critical area of banking.