European retail banks are lagging behind their American and Asia-Pacific counterparts with social media strategies, according to analysts Ovum.
A report from Ovum claims that European banks need to adapt their social media strategies to create more engagement with customers.
Currently platforms such as Twitter and Facebook are used purely as a 'broadcast' model, with the aim of managing the bank's reputation. However a shift is required to enable more customer interaction, with banks increasingly focusing on retention of customers as barriers are relaxed for new entrants into the market.
"Customer needs are changing - this fact is incontestable. It is now almost impossible to ignore social media," Jaroslaw Knapik, senior analyst at Ovum Financial Services Technology. "It transcends geographic boundaries, encouraging interaction and collaboration among disparate users united by a common cause, belief, issue, or interest. It provides a powerful marketing platform for understanding and engaging with customers, allowing banks to improve sales and profitability."
The report highlights that European banks are likely to change their stance in future. Within three years Ovum expects that social media will become a "significant retail channel" for banks.
This is likely to have implications for risk and compliance, the report notes, with banks needing to ensure the security of important data which can end up in the wrong hands.
He added: "European banks in particular find themselves at the back of an underperforming class when it comes to social media engagement, voicing concerns over data security, ensuring data privacy, as well as the potential reputational damage that can come from a mismanaged communication."
In the US bank regulator FFIEC began a consultation on guidance for banks using social media, with concerns over confidential information being leaked online.
Social media is continuing to gain ground in the finance sector, with the SEC announcing last week that it would allow corporate financial statements to be made through Twitter. Last week Bloomberg also announced that it would be pull in Twitter feeds into its trader terminals.