In the current century, there has been economic changes, technological developments, increased market competition, and changes in the buying behavior of consumers. Social media has proved to be very effective in catering to all these challenges faced by financial institutions. Studies have found that the usage of social media in South Africa is growing with a rapid increase of 6.8 million to 9.4 million Facebook users between 2013 and 2014. Internet penetration in Africa stands out at a population of 1.3b which is 36% of the total population. People using social media through mobile phones are 216 million which covers 17 % of the population. About 40% of Africans prefer social media for their banking transactions. The use of social media has increased prominently among the young generation. Social media has changed the structure of information along with its availability.
The importance of social media has also been increased due to Covid 19 which affected all sectors of the economy including banking. The role of social media has also increased more due to this pandemic leading customers to find online solutions for their financial needs. Financial institutions understand the power of digital banking to attract younger customers. Banks are communicating with their customers through social media channels hence building credibility while providing several products and services. Africa has become the second-fastest-growing market for electronic payments in the world. More than 50% of the adult population in Africa has access to mobile phones. Banks are recognising that by using mobile banking they can reach millions of potential customers, especially in the rural areas. Digital banking helps in bridging the gap between institutions and their prospective customers. Tailoring customer’s needs and providing efficient solutions can be done efficiently by digital banking within Africa.
An analysis by Mckinsey suggested that between 2019 and 2021, African banking revenue could fall by 23 to 33 percent. While the return on equity of the bank could fall driven by the increasing risk cost and decreasing margins. It is expected that 30% of the African consumers will use online banking more than post-crisis. This ratio means that increasing social media usage for financial services can help the banks to reach a larger and younger audience.
ROLE OF SOCIAL MEDIA TO ATTRACT YOUNG CUSTOMERS IN AFRICA
Social media is offering many functional benefits to financial institutions. With advancement in technology, firms are trying to adjust and adapt new techniques so that they can attain a competitive advantage over their competitors. In order to improve their performance firms are improving their strategies to capture the major share in the market. Involvement in social media usage is one of the strategies that could be used by the banking sector in Africa to attract young customers for their rapid growth. Social media is providing the following functional benefits to the banking industry allowing them to increase their number of customers.
Banks are using social media to connect with their customers in the easiest way. In this way, they can communicate and reach a greater number of customers in less time and cost. Building a relationship with customers through social media, enables the banks to respond to customer’s queries in less time. With this method, banks are able to manage a large number of consumers while maintaining accuracy of information at the same time.
Banks are also forming different types of bonds with their customers by using social media. These include financial bonds and relational bonds. A well-structured campaign by banks on social media contributes towards the growth of banker customer relationships. Financial bonds could be made by showing the customers how they can get benefit from a long term deposit. Likewise, gaining an understanding of the customer’s requirements and providing adequate solutions can help to make relational bonds stronger. African banks are using this relationship banking to attract more customers.
CREATING A BRAND IDENTITY FOR THE BANKS
Banks are using social media to reflect their firm as a thoughtful and caring entity that can help consumers to achieve their goals. Highlighting their functional aspects which are differentiating them from their competitors can help in the generation of a loyal consumer base. Building trust among young customers by using social media is helping the banking sector of Africa.
Well structured social media campaigns about banking products and policies are helping to better position the banks. A better strategy can help in enhancing the customer’s confidence in the bank’s ability to provide financial support.
SEGMENTATION AND TARGETING
Social media is being used as a marketing tool by the banks in Africa to create customer satisfaction. Consumers are divided into different groups depending upon their financial needs. Content for older age groups is subjected to the investigation about lifetime saving plans. While youngsters may need good deals related to their educational and entertainment purposes. Customers looking for a vehicle or home loan need information about reduced monthly installments. Well designed strategies are helping in identifying and tailoring the needs of the targeted audience.
CUSTOMER ACQUISITION THROUGH ADVERTISING
Banks are getting customer acquisition by showing the positive attributes of their financial products and services. Customers are persuaded to open new accounts with the banks by advertising through different channels of social media.
CUSTOMER INTERACTION, CO-CREATION, AND RETENTION
The banking sector is using social media in the most effective way for the interaction and retention of their customers. When a customer is using different products from a bank it tends to prevent them from wanting to switch to another bank.
BUILDING TRUST AMONG YOUNG CUSTOMERS
Banks are using social media to show off their performance in the banking sector. Showing the revenue reports and history of the bank’s performance helps in building trust among the young customers. Banks can provide different loans for educational purposes as well as micro-financing. Many online platforms like Facebook, Twitter, Instagram,
etc can be used by the banks to attract young customers. Using these tools is creating excellent new opportunities for the banking sector to communicate more effectively with their clientele. By using social media, banks can offer direct value to the customers looking for a financial solution online. Social media allows the banks to target their posts and ads more specifically. This will result in better engagement with young customers by saving their time in searching. Digital banking is the key to financial inclusion within Africa. Broadening the usage and penetration of the products and services by the banks in Africa through social media in real time becomes possible with digital banking.