Banking On Fear

July 20th, 2012

One thing banks like to have is control. And a relative lack of control is what makes social media so hard for some to swallow. Who knows what sort of unsavory information might get out into the public arena once the floodgates of social media are flung open?

Given the unstructured and dynamic nature of social media, it’s no wonder that many banks have been slow to embrace it. The industry is “woefully behind the social media curve,” according to New York-based Change Sciences Group, which studied the social media activities of 22 financial services firms in a February report. Similarly, assetinum.com, a Zurich, Switzerland-based information portal for investors, used some choice words in a March report—including inexperienced, clumsy and amateurish—to describe banks’ social media dealings.

Of the 50 banks assetinum studied, one-third did not yet have an active Facebook profile. Of those that did, about half did not respond to requests submitted to them via Facebook. While 42 of the banks have a Twitter account, only about half actively react to tweets from users. And less than half have an up-to-date YouTube channel.  “For a surprisingly high amount of banks, a social media strategy is still not distinguishable,” says Benjamin Manz, managing partner of assetinum.com, in a press release.

The banking industry’s record in social media does not compare well to the enthusiastic uptake by the rest of the population. Two-thirds of online adults in the U.S. (65 percent) already use social media platforms such as Facebook, Twitter or LinkedIn, according to the Pew Research Center in an August 2011 report. That’s up significantly from 29 percent in 2008, and only 8 percent in 2005. Nor is social networking limited to the young. Its usage among Internet users age 65 and older has grown 150 percent since 2009, to 33 percent in May 2011, according to Washington D.C.-based Pew.

“A lot of bankers and folks in the industry think that we’re still in the early adopter phase,” says Jay Valanju, CEO of Fisoc, an Austin, Texas-based software provider. “The reality is far from that.”

On the surface, there appear to be plenty of reasons for banks to adamantly avoid a presence on social media. A cursory look through the Facebook pages of just about any bank reveals a good amount of griping and complaining from customers. But while the real-time, unscripted and public nature of discourse through social media presents a certain amount of risk, banks may only be able to mitigate that risk by accepting it. “The information is already out there,” notes Matthew Wilcox, director of interactive services and marketing at Zions Bancorp. with $53 billion of assets in Salt Lake City, Utah. “Our argument is that we can be part of solving the problem.”

Already, strategies and practices are emerging that appear aimed at exerting greater control over the content that appears on social media. San Francisco-based Wells Fargo & Co., for example, makes an effort to direct customers to different social media outlets depending on the type of comment they have. The $1.3-trillion asset bank has a relatively long history in social media compared to other banks, with six blogs, three Twitter feeds, two Facebook pages and three YouTube channels so far.

On its Facebook fan page, Wells Fargo asks customers not to treat the forum as a customer service channel, directing them instead to branches, the call center or Twitter. The bank’s Twitter feed acts as a real-time response mechanism for customer service requests. That leaves the Facebook page more available to showcase more upbeat posts like financial tips, fun tidbits and photos from Wells Fargo-sponsored events. Wells Fargo’s second Facebook page, meanwhile, focuses exclusively on the history museums it operates in eleven cities around the country.

Wells Fargo’s latest foray into social media, introduced May 1, is an “online community” to jumpstart conversations specifically about planning and saving for college. After talking on the site to other students, their parents and Wells Fargo representatives about everything from choosing a college to financing an education, the bank figures that users of the site may well be motivated to seek out a student loan. “This is the first [Wells Fargo social media] site that’s really focused on getting customers answers that might lead to them filling out an application,” says Kimarie Matthews, vice president of social web for the bank’s interactive services group.

First Niagara Bank’s “We Love Upstate New York” Facebook page is also instructive in its ability to steer the conversation on social media. The $33-billion asset bank, based in Buffalo, New York, sought simply to celebrate the region in which it is located when it introduced its page in October 2011. The bank hoped to obtain 1,000 “likes” in a month. Instead it surpassed that goal within a day, reaching 30,000 “likes” within three months.

The page encourages people to share their passion for upstate New York through a number of activities, including posting scenic photographs, sharing their plans for fun in the area over the weekend, or contributing to a timeline of historic upstate New York milestones. It also shares links to festivals and events, as well as the occasional coupon for local businesses. The feel-good site avoids talk of banking, completely eliminating the customer criticisms that tend to appear on other bank Facebook pages.

For a bank, there is no harm in explicitly avoiding the topic of banking in social media. After all, the medium is supposed to be social. So congratulating the local football team and promoting charities and community events are all valuable activities. “It’s about building trust,” says Ally Basak Russell, head of compliance at San Francisco-based Hearsay, a provider of software that helps businesses engage with customers via social media. “It doesn’t need to be all business. That human element is very important to maintain,” she adds.

Since social media has yet to be addressed by banking regulators, another way of exerting control over the technology is to develop internal policies guiding its usage. Russell explains that in the absence of specific guidance, banks should seek to apply all the laws relative to traditional forms of communication to the new media. Making employees aware of customer privacy requirements and creating a place for static disclosures—say on the left hand side of a Twitter page—are two important considerations, she says. A number of new software companies, including Hearsay, exist to help businesses stay in compliance with regulations while also taking advantage of the marketing power of social media. Zions Bank responded to the compliance imperative by creating a social media steering committee that meets monthly to review policies and procedures and make changes to the employee handbook if necessary. “It’s a living, breathing document,” says Wilcox.

The flip side of social media’s ability to showcase customer gripes is its ability to spread positive news about the bank. The power of word of mouth via social media is one of the premises behind BuzzBanking, a retail banking program from Fisoc that both rewards customers and uses social media to get users to tell their friends about the program. BuzzBanking begins by giving customers points for performing actions, such as transacting with a debit card instead of a more expensive check payment. Customers can then win additional points by posting about their participation in the program on Facebook or other social networking platforms. “There is huge, huge virality in the program,” Valanju says.

Importantly, BuzzBanking does not let customers post willy-nilly about their experiences in the rewards program. Rather, BuzzBanking crafts messages about the program, which are then posted on behalf of its banking clients onto the Facebook pages of participating customers. “We control that messaging, and the customer doesn’t have to do anything,” Valanju says. “The majority of customers allow us to do that, and in exchange, they get extra points.”

For banks that have been avoiding social media so far, the reality is that there is little possibility of continuing to do so. Much like the telephone, the ATM, the computer and the Internet, social media is likely destined to become an everyday part of the business, like it or not. Wells Fargo has already seen a large increase in the number of customers communicating with it over Twitter. When it started on Twitter in 2009, it talked to about 200 customers a month, Matthews says. Now that number is up to about 3,000.

More significant is the positive impact that Wells has documented as a result of being active in social media. Wells tracks customer sentiment by rating customer comments on Twitter as positive, negative or neutral. Over time, it has recorded a consistent 20 percent to 30 percent increase in positive sentiments month to month, Matthews says. “When we engage with customers we make a positive difference,” she says.

The results speak volumes about the importance of banks embracing social media. The bank’s conservative estimate, derived from the number of followers of people who have made positive comments, is that 2.3 million people on Twitter have received a positive message about Wells during the last two years. “It’s hard to put a dollar value on someone saying nice things about us to all their friends and followers,” Matthews says. “I would gauge it as priceless.” 

Chris Costanzo is a freelance writer based in Maplewood, New Jersey who writes on technology and bank management issues.