Social Anxiety

The world is aflutter with tweets, posts and blogs. Except, that is, the world of banking.

Unlike other industries such as retail, where many companies have jumped into the world of social media with gusto, some of the biggest banks in the country lack even a Facebook page.

Banks and other financial institutions carry a huge amount of private financial data on the world’s citizens, they are risk averse and they are heavily regulated. Plus, what do they do about all those customers furious at their banks and eager to “tweet” about it online, a world whose commentary they can scarcely control? In short, there is a huge amount of fear about what can go wrong online.

But some banks, both large and small, are jumping into social media in a big way. New York-based Citigroup, for example, is using social media to let customers correct design flaws in its technology.

Danvers Bancorp in Danvers, Massachusetts, is engaging customers every day on Facebook or Twitter using a shoestring budget. USAA, a diversified financial services company in San Antonio, Texas, whose subsidiaries include a federally chartered thrift, is getting customers to rate its products online and using the reviews as free advertising. New York-based New York Life Insurance Co. is helping its investment advisors communicate with customers while dealing with the sizeable regulations of that industry. All of these institutions are transforming their strategies to reach customers where they want to be reached, as well as diffusing anger online and avoiding regulatory blunders that could come back to haunt them.

“(Banks) don’t have a choice,” says Nicole Sturgill of Needham, Massachusetts-based research firm TowerGroup, saying customers already are online talking about companies, reviewing their products and damaging their reputations right and left. “(Banks) are in it, whether they like it or not. They have to play. Or, they can sit there and have people say things about them.”

Not surprisingly, the heaviest users of social media are young adults, 18 to 29 years old, where 86 percent used social media platforms like Facebook or Twitter in a May survey by The Pew Internet & American Life Project.

However, young people are not the only ones using social media. The survey found that 42 percent of people over the age of 50 years old used social media in May, double the rate of a year prior. The onslaught of social media has come with added risks, since customers are so vocal about companies online. “Organizations have now lost control of the brand, to some degree,” says Jesse Torres, president and chief executive officer of Pan American Bank, a $43-million-asset institution in Los Angeles. “The brand is no longer in the hands of the organization. It’s in the hand of consumers.”

Sturgill says one of the biggest examples of the sort of control customers have online was when the National Union of Students in England in 2007 organized a Facebook page boycott of London-based HSBC because it had instituted overdraft fees. HSBC responded to the overwhelming bad publicity by getting rid of the fees and reimbursing students who had paid them. The bank now has an active Facebook page.

According to a September report from technology-focused Forrester Research Inc. in Cambridge, Massachusetts, financial services firms in the U.S. spent just $165 million on social media marketing in 2010-less than 4 percent of their interactive, or online, ad spending. Forrester’s survey of 38 firms, including investment banks, commercial banks and insurance companies, found that while most had some presence on social media, only 10 out of 24 firms with a Facebook page actually replied to customer questions or concerns on it. The Forrester analyst, Nate Elliott, calls it “disappointing.”

One exception is Citigroup. At $1.2 trillion in assets, the New York-based company is shaking up its social media efforts by hiring one of the industry’s pioneers, Frank Eliason, whom the company lured from cable services provider Comcast Corp. last August. Eliason is one of the better known figures in the world of corporate social media, famously having gone to a customer’s house to help with a technical problem after seeing the customer complain about it online. Eliason says he hasn’t gone to any Citigroup customer homes so far.

Eliason had more than 8,300 people following his “tweets” on Twitter in March, more than double Citigroup’s. (Citigroup on Twitter goes by the name @AskCiti). Already, he has changed the bank’s policy of requiring a compliance check on every post and response on Facebook or Twitter, which bottled up the process. Now, his team of three employees plus about 100 customer service representatives trained to handle social media can go online and post certain innocuous comments without approval from higher-ups.

“We came up with a matrix that we used for what needed approvals and what didn’t,” he says. “You don’t want it to be so scripted that (customers) all get the same tweet. It won’t make them think you are listening.” Listening can be a blistering way to hear what people are saying about you. A big banking company like Citigroup is bound to get bruised. Eliason tries to keep “authenticity” on the company’s Facebook page by allowing negative posts to remain on the page, so customers know he’s not trying to control the message.

“We aren’t perfect and we can say, ‘yeah, we can learn from that,”’ he says.

The bank also responds to many negative comments, offering to help people offline who complain on Facebook.

Listening to customers on social media also helped the bank make changes to its iPhone application for mobile banking, which got some negative reviews online. The bank made changes late last year so the application was easier to use, reintroducing it with an announcement that Citigroup had listened to its customers.

“That feedback is very much a part of our culture now,” Eliason says.

He also thinks social media is a much cheaper way to handle customer complaints and questions than phone calls, which can cost about $8 per call in a call center setting.

Eliason says he was unable to estimate the cost of social media for Citigroup. “The cost to be in this space is almost negligible,” he says, noting he has three employees out of an organization with more than 200,000. Still, Eliason admits, the cost is not zero. One of his vendors, Palo Alto, California-based Attensity, which provides social media monitoring and analysis, said it charges anywhere from $50,000 to $500,000 annually for the service.

Clients also include The Vanguard Group, The Royal Bank of Scotland and Wells Fargo & Co.

But many large banks aren’t so open to talking with customers online. As of mid-March, Charlotte-based Bank of America Corp. wasn’t posting anything on Facebook, although its customers were. Someone had started a Facebook page called Bank of America Sucks. A spokeswoman for Bank of America, Tara Burke, declined to comment.

In contrast, some small banks are actively navigating the social media world. Danvers is a $2.6-billion-asset community bank with 27 branches and no money to pay social media software vendors or consultants. So it didn’t.

The bank promoted Jennie Allen, who had been an assistant branch manager, to public relations and social media manager, and she helped launch the new Facebook page in June. She and corporate communications manager Cheryl French check into the bank’s Facebook and Twitter accounts around the clock, including nights and weekends. If someone posts a complaint on the company’s Facebook page on a Friday evening and doesn’t hear back until Monday morning, “that’s a long time in the social media world,” French explains.

The bank also had to manage customer anger recently over the January announcement that it would be acquired by the much larger, $25-billion-asset People’s United Financial Inc., based in Bridgeport, Connecticut.

French spent her time personally addressing each complainer on Facebook using her own name: “Perfectly understandable,” she would say. Or: “We don’t have all the answers right now,” and “We will be sorry to see you go.”

“They are venting on our (Facebook) page,” French says. “People are upset and it’s OK for them to be upset.”

Her policy is to take down anything “malicious” or “profane” but she hasn’t seen anything yet that would meet that qualification. When a credit union staffer posted a comment on Danversbank’s Facebook page trying to lure disappointed customers away, French responded, but didn’t take down the competitor’s comments, she says.

“It’s not an online brochure,” she says. “It’s a living, breathing thing.”

Danvers had about 1,000 fans on Facebook earlier this year, not exactly outrageous by Facebook standards, but not bad for a relatively small bank that doesn’t even have a social media budget.

It has been luring people to its Facebook pages with offline promotions. The bank branches promoted a Facebook contest last winter to give away a one night stay and two lift tickets to Stowe Mountain Resort in Vermont. To enter, fans had to “like” the bank on Facebook and give the bank an email address and name. The contest, which lasted 15 days, drew more than 240 “likes” for the Facebook page and 141 people who also opted in for the bank’s e-newsletter, French says.

“It’s about working every day to come up with content that is fun and different,” Allen explains. “We don’t talk about banking all that much.”

If a customer asks about something like an interest rate, which requires certain disclosures, Allen says she would simply link to the bank’s web site, which does have such information. The idea is to communicate with customers and create a back-and-forth relationship, not try to sell them products.

And the bank did it cheaply: start-up costs basically consisted of a month’s worth of salary for French and Allen while they planned the social media strategy and explained to employees what they planned to do. Danvers uses free Google analytics tools to see who is using links from social media to the bank’s web site. It uses Facebook’s own free metrics to judge how many people are viewing the site and what they are doing with it.

One bank that decided to go beyond Facebook and Twitter is San Antonio, Texas-based USAA, which focuses on military service members, veterans and their families. Many products now are available to the general public, like investment management and most checking and savings accounts.

The company was “blown away” by its success in launching online customer reviews in March 2009, according to Brad Strothkamp, a principal analyst for Forrester Research, who published a case study on USAA in March 2010. A spokesman for USAA and former social media director Tom Vaughn, who subsequently was hired by Microsoft, declined to talk about the company’s social media strategy.

But the results aren’t much of a secret.

USAA let its customers review its insurance and banking products online and 16,275 reviews came rolling in between March and December of 2009, Strothkamp says. The firm decided which reviews got posted and which didn’t, taking out questions, legal issues or reviews that included profanity. The company ended up approving 86 percent of the reviews customers submitted for publication on the web site, including bad reviews, Strothkamp says.

USAA found that more people bought products online when they were presented with customer reviews, resulting in an estimated increase of 15,978 more products and insurance policies sold between March and December 2009, Strothkamp notes.

“(Reviews) increase (customer) confidence,” says Joe Dauskurdas, vice president of sales for financial services and healthcare at Bazaarvoice, which manages the reviews and other interactive web site content for USAA. ” It keeps them engaged and keeps them from leaving your site. You don’t want them to leave and do additional research.”

Banner ads on any company’s web site typically get less than 1 percent click-through rate, meaning few web surfers ever click on them, but posting customer reviews in a USAA banner ad increased that rate by 32 fold, according to the Forrester report.

By putting reviews on its web site, instead of just watching outside web sites such as yelp.com post reviews about its products, USAA took control of the process, Strothkamp explains. For instance, the company could highlight the good reviews and use them to promote its products, even while letting customers scroll down to see the bad reviews.

Dauskurdas, who declined to discuss the cost of his service, says his company has someone look at every review before it is posted, making sure it doesn’t violate the firm’s policies or cause regulatory headaches.

Regulatory compliance problems are one of the biggest headaches for banks trying to respond to customers online and there is little guidance from banking regulators on how to handle it. The Office of the Comptroller of the Currency has no specific standards. Neither does the Federal Deposit Insurance Corp., nor the Federal Reserve.

“The regulators have been more concerned with stabilizing the banking industry,” says Pan American Bank’s Torres, who recently published his book, Human Resources Guide to Social Media Risks. “They’ve got social media on the backburner.”

Although Torres and others say the regulators aren’t requiring a social media policy per se, regulators doing exams sometimes ask for policies if they find out the bank talks to customers on Facebook or Twitter, for example. They want to know how the bank is handling the risk involved in social media, so having a policy is a good idea, Torres says.

Torres’ developed his own social media policy and makes all 26 employees read it and sign it, just as they must do for other policies that protect customers’ privacy and financial information.

Even posting the name of a famous person who just opened an account may violate privacy rules, says Jill Czerwinski, a senior manager at Crowe Horwath LLP, a public accounting and consulting group.

For publicly traded companies, employees who disclose non-public information that could impact the company’s stock might violate Securities and Exchange Commission (SEC) rule FD, which governs fair disclosure, she says.

Making sure all the employees know that is important.

“Think about what you’re writing before you write it,” she says. “Think about it as if it were on the 10 o’clock news. Don’t have a false sense of privacy.”

Even the experts have gotten into trouble with controversial posts. James Andrews, then an executive at public relations firm Ketchum, flew to Memphis in 2009 to give a talk to FedEx employees about digital media when he tweeted: “True confession but I’m in one of those towns where I scratch my head and say ‘I would die if I had to live here!’” according to Business Week.

Someone at FedEx, which is based in Memphis and is a big client for the firm, got offended and the comment touched off a minor scandal that forced an apology from the executive and a public response from FedEx.

“What you can say in social media has the potential to be taken completely out of context and become ‘media’ very quickly as evidenced by my example,” Andrews wrote by email to Bank Director, saying his comment related to a racist encounter with a hotel clerk in Memphis. Andrews is African-American. He has gone on to start his own agency called Social People, advising clients on using social media.

Andrews says the twitter incident “gives me instant credibility when counseling my clients on how to use the tools.”

Nathan Johns, a senior manager in the risk consulting group at Crowe Horwath, recommends all banks get a social media policy in place and educate employees about it.

“Banks regulators don’t want to block it completely but they are trying to make sure banks train employees and keep an eye on it and make sure the employees are educated,” he says.

One exception to the lack of regulatory guidance is the Financial Industry Regulatory Authority, the self-policing arm of the brokerage world. FINRA published a regulatory notice in January 2010 on social media, emphasizing that the industry’s substantial rules regarding customer communication also apply to social media. The SEC has not issued social media guidance, but has indicated the same rules that govern communications offline govern them online.

For FINRA-regulated brokers and dealers, each communication with a customer must be recorded and kept on file for compliance review-even a Facebook post, according to a January 2010 regulatory notice from FINRA.

“The same rules apply, it doesn’t matter what the device is,” explains FINRA senior vice president of advertising regulation and corporate financing, Joseph Price. “If you’re communicating with customers, you have to retain and supervise those communications.”

A FINRA-regulated broker-dealer on Twitter must respond within 15 days to someone complaining directly to the firm on Twitter, just as if the complaint were delivered by the U.S. Postal Service, he says.

To avoid violations, investment management firms and brokerages such as New York Life Insurance Co. have spent years forbidding agents from engaging with customers on Facebook or Twitter or even LinkedIn, a social media platform geared toward professional networking.

The New York-based company allowed agents to have a LinkedIn account with a pre-approved profile of biographical data and a resume, but agents were forbidden from communicating with anyone online about their work-an awkward policy to follow. So the life insurance company decided recently to change its rules. “(The policy) was causing a lot of frustration,” says Gerard Rocchi, a senior vice president with New York Life.

Such policies also are hard to enforce. Chad Bockius, CEO of Socialware in Austin, Texas, which provides monitoring and archiving software for financial institutions, says an emailed survey he conducted in the summer of last year found 39 percent of financial advisors using social media admitted to violating their firm’s policies.

FINRA’s Price says he had no way of knowing if that was on the mark. FINRA has not taken any public action against brokers or firms for violating its social media rules. Still, firms are careful.

New York Life has spent more than a year with a team of about 10 people, from compliance to information technology personnel, figuring out how to allow agents to use social media for work. A lot of software vendors the company looked into didn’t seem to understand the financial advising industry well, says Tom Shea, a first vice president for New York Life.

The company eventually chose Socialware, which charges about $25 to $30 per month per user, to archive and monitor communications from more than 11,000 agents and field managers for New York Life.

Agents don’t get free reign. Retweets on Twitter, where you can pass on someone else’s comments to your followers, are forbidden because the firm doesn’t want to inadvertently endorse financial products. To handle the big regulatory burden, the company offers training as well as resources to agents who want to use social media. The company declined to estimate costs for its social media program.

“Bottom line, customers and your employees are going to be on social media sites,” says Jill Czerwinski of Crowe Horwath. “The reputation impact could be significant.”

Social media platforms have shown their capacity to get people in trouble. They’ve also given consumers a new way to exert pressure on companies, as HSBC found.

But the platforms also have shown an infinite number of new ways to reach customers online, and transform relationships without a huge amount of cost. Bockius says many financial firms are becoming active on sites such as Facebook, having spent a long time trying to decide what to do.

“No doubt, we will look up and there will be thousands of financial sites later this year on Facebook,” he says. “Everyone is watching it. Everyone is working to get it out the door.” |BD|


Naomi Snyder


Editor-in-Chief Naomi Snyder is in charge of the editorial coverage at Bank Director. She oversees the magazine and the editorial team’s efforts on the Bank Director website, newsletter and special projects. She has more than two decades of experience in business journalism and spent 15 years as a newspaper reporter. She has a master’s degree in journalism from the University of Illinois and a bachelor’s degree from the University of Michigan.

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