Retail banks must get to grips with social networking websites if they are to improve customer service.
Research by Ovum in their 'The Impact of Social CRM on Retail Banking' report revealed that two out of five banks around the world are vulnerable to competitors because they have no social media strategy in place.
The report discovered that just six per cent of retail banks use sites such as Twitter to deal with customer queries, while only one per cent intends to implement a social media strategy by the end of next year.
In addition, it was found that 14 per cent of retail banks use social media sites for marketing and a further 12 per cent said that they would follow suit and have such a strategy by the end of 2012.
Martha Bennett, Ovum analyst, said that retail banks which fail to take advantage of social media sites are at risk of falling behind their competitors because they will only provide substandard customer service.
She said: "We feel that this attitude from retail banks towards social media is a major issue in an era of aggressive competition.
"The banks without a social media strategy are being short-sighted and are placing themselves in a dangerous and vulnerable position compared to competitors who have realised that social media can and must play an intrinsic role in their business."
Ovum's findings were supported by Virgin Media Business who found that, even though British high street banks received an average of 180 Tweets a day, most were not using the micro-blogging site for customer service purposes.
The Institute of Customer Service said that almost a tenth of British customers expected their businesses to be on Twitter and 55 per cent wanted to receive a response to an online complaint within a day.
A study by Consumer Focus found that three quarters of consumers complain against their bank but less than half are content with the response they receive, which is typical of their poor levels of customer service provided by British banks.
Oliver Morgans, financial services expert at the group, said that banks need to realise the significance of these findings and improve customer service or risk losing consumers.
He said: "Decent customer service is a necessary part of a healthy market and a successful company. The evidence suggests banks are currently falling a long way short."
Banks can improve the levels of service they provide by utilising systems thinking theory as this looks at an organisation from the customer's perspective.