The Hidden Capital of Social Networks

3-15-12_tom_bennett.pngA general truism is that people tend to do business with their friends or even the friends of their friends.  At First Oklahoma Bank in Tulsa, Oklahoma, we are trying to use this to our advantage.

The prospect of Basel III being implemented is getting banking institutions, including ours, focused on increasing equity capital to meet the potential increase in capital requirements. However, there is another “capital” component that is good to think about mobilizing: The social capital among bank investors.

Social capital is essentially the ability of a diverse group of individuals working together to get things done by using their memberships in diverse social networks or other social structures.  At this point, it is essential that banking institutions see the value of social capital as an economic tool to get things done.  Consider the value of the following things getting done via social capital:  

  1. Access to information about what is happening in the community or who is doing what deals
  2. The exertion of influence on potential customers, new employees or new investors
  3. Social connections or introductions to people with money and/or deals 
  4. Endorsements that reinforce the identity, recognition and reputation of your bank
  5. Associating the trust that we have in a friend with an organization in which they are invested.

While most of us regularly seek to nurture and increase the social capital of the bank represented in the bank’s employees, we should also be thinking about how to do this with our investors.  Reflect upon the wide array of memberships in extended families, university alumni associations, professional associations, religious organizations, and civic or social organizations that exist within your investor group.  Imagine the impact their collective social capital might have on the performance of your bank.

One method our bank uses to engage and mobilize our investors’ social capital is sending a quarterly report to each investor called Talking Points.  It’s a practice adopted from the political world that is intended to get our investors on the same page and spreading the good news about their bank.  We include in our Talking Points information for our investors to share with their social networks about how well their bank is doing and why they should move their business to the bank.  Regular elements of Talking Points include charts describing the bank’s growth, comparisons of the bank’s services to competitors, descriptions of any special promotions the bank is offering and a section describing what you can do to help make your bank more successful.  Because of the diversity of social networks among our investors, the Talking Points message reaches groups that our employees alone could never have done.  We believe this has been an important factor in our bank’s $216 million in asset growth in our first three years and two months as a de novo bank.

By engaging the investors of the bank and connecting to their social capital, you build a diverse reservoir of informed and motivated sales people that can be drawn on to both market the bank and potentially to raise additional equity capital in the future.  We believe this is an important reason why we have been able to raise $32 million in equity capital from our investors over the last 42 months in three separate stock offerings.

As you think about how to address your equity capital needs and other performance items in your bank, think of the social capital that exists in your investor group and how it can be utilized as a valuable source of strength. Figuring out how to use the social networks of your investors may be as important as getting their equity capital invested in the bank.  

An important business goal should be figuring out how to gain and engage more friends.  

If you would like a copy of our Talking Points, please let me know at  If you have any great ideas on how this works in your investor group, please let me know.  We can all benefit by learning from others.

Demystifying Social Media

foggy-walk.jpgIn a recent McKinsey & Co. article “Demystifying Social Media,” Roxane Divol, David Edelman, and Hugo Sarrazin explain how senior leaders can break down social media into its four primary functions when developing social media campaigns and assessing the financial impact of their social media presence. 

1. Monitor

 Such brand monitoring—simply knowing what’s said online about your products and services—should be a default social-media function, taking place constantly.

2. Respond

Valuable though it is to learn how you are doing and what to improve, broad and passive monitoring is only a start. Pinpointing conversations for responding at a personal level is another form of social-media engagement. This kind of response can certainly be positive if it’s done to provide customer service or to uncover sales leads. Most often, though, responding is a part of crisis management.

3. Amplify

“Amplification” involves designing your marketing activities to have an inherently social motivator that spurs broader engagement and sharing.

4. Lead

Social media can be used most proactively to lead consumers toward long-term behavioral changes. In the early stages of the consumer decision journey, this may involve boosting brand awareness by driving Web traffic to content about existing products and services.

To read the full article at, click here.

New Media Compliance Issues: Is Social Media Right for Your Institution?

socialmedia.jpgAt the heart of social media – blogs, social networks and other multimedia endeavors –  is a real-time, open and public dialogue accessible by anyone with Internet access. By the time your legal and compliance department has vetted a 140-character tweet, the conversation has changed. The reality of instantaneous engaged marketing with your customers can excite production staff and perplex compliance personnel. It doesn’t help that many of the rules that apply to the use of social media were created long before blogs and social networking consumed our lives. Perhaps this is one reason why the banking industry has lagged behind in the social media movement. But in the new reality, to ignore the movement is to be left behind. That is why financial institutions, regulators and attorneys are starting to get on board. The landscape may be unsettled, but it’s not entirely unmanageable.

Businesses, including financial institutions, are starting to see the vast potential for social media use.  Companies are connecting with their customers almost instantaneously and are receiving the kind of immediate feedback that once would have been obtainable only via costly and time-consuming surveys. Many companies are using social media as a customer service platform to create an online community of connected customers. The bottom line is maximization of advertising dollars. Businesses can reach any number of plugged-in consumers through the click of a button. Unlike television or radio ads, an online advertisement can be accessed any time, day or night, and gives the business the ability to change the course of the marketing communication mid-stream to create a fluid message in tune with current trends.  With all of these benefits, why has the financial industry been so slow to adopt social media?  Blame it on the disconnect between static regulations and innovative technology.

Compliance Issues In Social Media

The rules of compliance haven’t directly changed due to the advent of social media. However, the facts have changed, impacting the application of the rules. The underlying risk to your institution stems from the nature of how social media impacts the delivery and retention of information in addition to the ever-present privacy concerns.

Information Delivery

Deceptive Advertisements: The Federal Trade Commission (FTC) has long been the guardian of the consumer in the advertising arena. The rules are seemingly simple – advertisements have to be truthful and not deceptive. Easy enough, right? What if I told you that an employee blog that you may or may not know about could be considered an endorsement under the FTC Act if the employee is touting one of your institution’s products or services? In this instance, the blog post in question would have to be entirely truthful and the employee would be required to disclose his or her relationship with your institution regardless of whether your institution is aware of, or has authorized the message. (See the FTC’s Revised Guidelines concerning the use of endorsements and testimonials in advertising. This is just one among countless examples of these types of rules, present at the state and federal level.

Advertising Disclosures: What about microblogging ( i.e., the 140 character tweet)? If an interest rate for a consumer loan product is quoted, how can all of the accompanying disclosures required under state and federal law possibly fit? Crafting the message in light of the limitations of the medium is a critical factor in an institution’s ability to comply with the rules. 

Federal Securities Laws and Blue-Sky Laws: For publicly-traded companies, regulators have begun to address social media in the context of securities laws. Forward-looking statements regarding company performance are a delicate issue, even after thorough vetting by legal counsel. Employers will be liable for the statements of their employees, authorized or not.

Information Retention

Your institution already employs some level of technology to assist you in the collection and retention of certain types of information. This may be in the context of advertising retention rules per state law or e-discovery rules under the Federal Rules of Civil Procedure. Additional retention and reporting requirements come into play under the Sarbanes-Oxley Act, USA PATRIOT Act and other related laws. By its nature, social media is harder to capture and catalogue for later recall. However, technology providers have emerged that focus specifically on this type of media. 

Privacy and Security

Some companies use social media sites for customer support. This use requires special attention, especially in an industry as heavily regulated as banking. Institutions must ensure that any use of social media avoids conflict with existing privacy laws and internal security policies. In addition, regulators are growing increasingly concerned about information technology risks and have adopted compliance guidance.

Suggestions for Conquering Your Institution’s Social Media Fears

Demonstrating that you are cognizant of the risks associated with social media and addressing those risks with thoughtful and effective policies and procedures is just as important as the end-result. Here are a few suggestions:

Dedicate significant time and resources to developing current policies and procedures regarding social media. A number of stakeholders will be critical to this process and they should start by analyzing known risks. The results are highly dependent on your institutions risk profile and the process should be thoroughly documented. Show your work. Regulators will want to know that you take these policies seriously and have acted with a sufficient amount of diligence and caution. Make sure your social media policies and procedures are effectively communicated to your employees. Address violations of social media policy swiftly and decisively.

Monitor for compliance and protect your institution’s brand. The social aspect of social media creates the possibility that some users will have less than stellar things to say about your institution. Treat those situations as a customer service teaching moment and a way to gain feedback about your institution. In addition, to the extent that you have protected trademarks or servicemarks, develop guidelines for employees with communication privileges so that they can adequately protect those marks in the public arena.

Consider using third parties to assist you. There are a number of technology companies available to assist you in message search and monitoring, access management and archival solutions. Reach out to those companies. At the very least, you may get some ideas on areas of focus for your policies and procedures. At best, you’ll find a competent vendor partner to automate what would otherwise be a laborious process.

Go slow. Total institutional immersion into social media doesn’t have to happen overnight. Take the time to create a culture that embraces the effective use of social media and the related compliance components. Consider slowly adding mediums and employees into the fold after adequate training and guidance.

Vendor Management

In a recent interview with, Donald Saxinger, senior examination specialist at the FDIC, suggested that social media providers would have to be treated as vendors for purposes of the FDIC’s Guidance for Managing Third-Party Risk (FIL 44-2008). In addition, he suggested that social networking sites could be considered to be the type of vendors that banks must report to the FDIC under the Bank Service Company Act (BSCA) within 30-days after the relationship begins. (12 U.S.C. § 1867(c)).

The basic premise of the third-party risk management is that the board of directors and senior management are ultimately responsible for the activities conducted by third-parties on behalf of the bank to the same extent that they would be if the activity were handled within the institution. The majority of the guidance from the FDIC pertains to “significant third-party relationships”; however, institutions should consider following this guidance for all social media vendors. Until there is more guidance available pertaining specifically to social media vendors, those companies should be treated as any other vendor would. This means completing a risk assessment on the outsourced activity, due diligence in selecting a third-party, contract structuring and review, and continuing relationship oversight.

The BSCA requires institutions to use the FDIC form titled Notification of Performance of Bank Services to report all vendors performing “Bank Services” as defined in 12 U.S.C. § 1863. Institutions should consult with their legal counsel as to what social media vendors fall under this category for reporting purposes. This question could be difficult until further formal guidance is issued.

Two things are certain with social media – it’s inevitable and ever-changing. Some of these same discussions took place with the adoption of email usage. Just read the disclaimers at the bottom of your last email exchange. Caution and innovation don’t often mix, but your institution can make the best of both worlds with a little time and effort.

Disruptive? Mobile? Regulated? Check, check, check

It’s funny the things that cross your mind in an airport. I snapped this picture of a classic American plane docked in Chicago pre-flight to China this morning. Patiently waiting by the gate must have been 200+ people, 95% of whom appeared glued to their iPad, iPhone or Android-powered mobile device. To say I was impressed is an understatement. Users of mobile technology are known for being many things: patient is not one of them. They want new tools, new applications and they want them today. Maybe I should have photo’d the departure lounge…


From the board room to a branch office, it’s no state secret that today’s mobile banking customers expect access whenever and wherever they are. With so many banks investing in new technologies that allow customers to complete transactions, manage accounts, and perform banking research via their mobile devices, one can see why. Mobile banking services — think remote deposit capture, two-way text banking, apps for locating branches and ATMs using GPS and bill payment — have become the norm. So how to differentiate your bank from your competitors?

In my next few posts, I’ll take a look at this question.  With banks (both big and small) riding the mobile wave to strengthen relationships and add to their bottom lines, I thought to set the table with insight gleaned from our friends at PwC.  Last month, the Banking & Capital Markets group published “How Retail Banks Can Thrive in a Disruptive, Mobile, Regulated World” to assess the implications and opportunities created by mobile phones and social media.  My cliff’s notes:

  • Social media continues to provide banks with new ways to improve brand recognition, expand customer reach, enhance a customer’s experience and introduce new products (for more, see these posts we ran in January about how to benefit from social media and social networking platforms);
  •  While most large national banks have slowed their pace of retail bank acquisitions because of regulatory limits, banks with access to capital continue to view acquisitions as a growth opportunity. Such acquisitions benefit banks by enabling them to (a) reduce combined operational costs by eliminating redundant back-office functions, (b) spread technology investments and regulatory compliance costs across a larger base, (c) gain access to new markets and customers for cross-selling, (d) increase the ability to invest in state-of-the-art technologies; and
  • Leading institutions are adopting a new customer-centric model to replace outdated product- centric models.

A few big takeaways for me? Bank execs need to quickly and decisively adopt new approaches or risk being left behind. Moreover, by tailoring channels to a specific customer segment or purpose, banks are capitalizing on the distinct and complementary roles of distribution channel, all while managing costs. Yes, this is the land of opportunity, and the applications of new mobile technologies and strategies bears close watching. More to come next week.

Social Media Series: A Look Ahead

This is the fifth and final post on the value of social media for today’s financial services executive. Over the last month, we’ve looked at the fundamentals and why you need to care about newer trends and technologies, how some have successfully incorporated social media into their institutions way of doing business, the need for individuals and companies to be both authentic and transparent, and how you might personally get up and running if you’re not already. Today, we look ahead to social media in 2011.  

As this series draws to a close, cue the music*:

If this is it
Please let me know
If this ain’t love you better let me go
If this is
I want to know
If this ain’t love baby
Just say so

By now, we all know that social media marketing carries the same risks as traditional marketing. But with the continued surge in social services like those offered by Twitter, LinkedIn and Facebook, social networking platforms present powerful ways to connect with employees, consumers and shareholders of all generations.


Social media blends technology and social interaction; done right, it can be a win/win/win. Such networking co-creates value for you, your financial services company and your customers. Community building is something we all can do more of in 2011; hopefully these columns have inspired you to think about how you can get engaged and stay involved with conversations about your institution. Yes, a LOT has been written about social media, so I thought it would be interesting to share three predictions for 2011.  

Beyond the standard ‘you will train employees on the proper way to communicate with customers through social media,’ I’m excited to see the following take place:

  1. As more people take to mobile technologies (coupled with a wider adoption of tablets like the iPad), marketing efforts that incorporate online, in person and in print activities — supported by social media plans — will appreciate in value.
  2. Customer service departments take over as the main proponents of social media, with the full support of the CMO and leadership teams.
  3. Banks leverage geo-tagging applications to prepare/predict for traffic in their branches and at least one gets into social gaming in a big, big way.

Have a few predictions of your own that you’d like to share? Leave a comment for us below. While this is the last post on this particular series, our VP of Digital Strategy will be leading a panel discussion at our annual Acquire or Be Acquired conference in Scottsdale later this month. If you’re game to share your view(s) with her, I know she’d appreciate your thoughts.

*Can’t get the refrain out of your head? You have Huey Lewis & The News to thank for that.

Social Media Series: Getting Up and Running

In my last few columns, I’ve written about incorporating social media into your institution’s way of doing business. Today’s post offers advice for how you, individually, might benefit from what’s being created and shared online.

What a year we have in front of us. A number of social media technologies and platforms are maturing simultaneously, creating a wonderful shift in online social and consumer activity. Just as a number of banks turned to social media last year as a way to become more transparent to their customers, getting online allows you to build an element of trust with your customers, employees and shareholders. For example, consider the investments made by Green Bay’s Nicolet National Bank. With posts like “All I Really Need to Know About Economics I Learned From my Grandparents” and authors including their CEO and COO, this represents a nice example of social media being put to great use.


So if you’re still new to the trend, here are three recommendations to get you up and running:

  • Think about writing a blog like the guys at Nicolet do. Regardless of industry, more and more CEOs are using their own blogs to communicate with shareholders, employees, customers and the general community. Two that I follow that might inspire you are KellBlog and Ben’s Blog.  And yes, I practice what I preach, with my own site, DCSpring21, posting my own ideas since March of 2008.
  • Get a Twitter account. Even if you don’t want to tweet, following the conversations of your favorite information resources (@bankdirector, hint hint) provides for easy crowd sourcing and keeps you up-to-date with the most breaking news.
  • Update your LinkedIn profile and manage what people see about you. Step one: upload a current picture. Step two: start connecting with former colleagues and your current business partners. Step three: see that line of text under your name? It’s the first thing people see in your profile. It’s your brand, use it wisely!

Let me also suggest two behavioral changes for 2011:

  • Start commenting on blogs. Sure, it might feel intimidating to be the first to add a comment (the equivalent of being the first to raise your hand in class), but sharing your ideas and experiences contributes to the overall experience when reading stories like this one.
  • Encourage picture sharing by your employees… and start contributing to the fun. Over the weekend, I read 6 Predictions for Social Networks in 2011. What stood out? The observation that mobile photography is just beginning to blossom — and what that means to all of us smartphone wielding multi-taskers.

I hope this advice helps.  If you’re coming to our 17th annual Acquire or Be Acquired conference in Scottsdale, Arizona later this month, be sure to bring your iPad to our Tuesday morning session on using social media. Our VP of Digital Strategy will be leading one of a number of great discussions that will take place at our growth-focused conference out in the desert.

Social Media Series: Authentic – true to one’s personality, spirit, character…

Last Monday, I wrote about how social networks are changing a bank’s customers’ experience. Well, its up to the leadership within an institution to incorporate your online interaction into your way of doing business, and today’s column looks at how one company is doing just that.

If pressed to offer just one word that that sums up social media today, it is the title of today’s post.  That is, successful financial services companies do not automate their responses, yet they do integrate links/videos/pictures and they understand that they simply influence (not control) their bank’s message.  In short, they are true to their culture, which I assume aspires to provide exceptional customer service.

In our “world-is-flat” day and age, the Internet offers around-the-clock service and availability to customers as well as an engaging platform for prospective ones. Being “always on” allows a company, bank or credit union to continuously share brand messages and gain macro-level insights into their customers’ online behavior. Regardless of your asset size, understanding the strengths and weaknesses of your competitors is a critical component for improving your own institution’s business results and profitability.

social-media-ally.jpgWhether you’re a bank with relatively small deposits, an institution of a healthy asset size or one of these banks’ competitors, social media provides smart, progressive types with a tremendous amount of research on user behavior and attitudes.  Take, for example, Ally Bank and USAA.  The former being the old GMAC; the latter, serving the military and their families since 1922.  Both provide insurance, online banking and mortgage operations to its customers.  But notice anything interesting about the twos interaction with their respective followers on a social media site like Twitter?

While I’m not suggestion the number of tweets correlates to the number of followers, a quick survey of the comments and conversation leads me to believe that USAA gets the whole concept of community building.  In fact, I reached out to both Ally and USAA through Twitter where my online inquiry to Ally was met with silence, and the one sent to USAA received a response within two hours.  Community building is something that all banks should be doing, as so much of what we do work-wise and personally requires some form of relationship with a bank.  And it’s not just on Twitter that USAA is making itself available. Take a look at its Facebook page.  As of December 22nd, 127,696 people “Liked This.” Impressive.


I use these two examples not to castigate Ally or promote USAA; rather, to show how one company has realized that, despite our turbulent financial environment, investing in this medium allows them to really engage with their customers, build trust and act in an open and honest manner.  Living in Washington, the word that bankers and financiers can’t escape is transparency.  So if we opened today’s post with the word authentic, let me close with transparent.  If you can marry the two, you’ll be well ahead of your competition.

Social Media Series: Is your bank using?

In my last column, I wrote about social networking platforms presenting banks with powerful new ways to connect with consumers of all generations. This week, we look at the benefits of social media and clear up some misconceptions about the practice.

At a time when a number of institutions — both big and small — consider implementing new technology strategies to lower costs for retaining clients, improving operating efficiencies and differentiating brands and customer offerings, surprisingly few banks leverage social media as a communications channel. Considering the U.S. economy struggles to emerge from its bleakest conditions in 80+ years, one would think that most would readily embrace an opportunity to engage with anyone visiting them “digitally.”
diving-board.jpgIn today’s massively connected world, tools and technologies continue to present new ways to share/consume day-to-day information. According to a white paper put out by comScore, an Internet marketing research firm, this has significant impact on the industry. While its generally accepted that online banking continues to grow in importance for the average American, did you know that “in any given quarter, nearly 60% of the total U.S. Internet population visits at least one of the top 20 financial institution sites.

Those are some big numbers that any bank — community, mid-size or large — should take note of.  Now, I’m not suggesting you go out and start using social media to promote your latest credit card offer. A word of caution that banks using social media channels to sell products or hype their services will quickly fall behind those using such tools to boost their customer service quality. Resolving issues quickly; now that’s something people want that you can give them. 

This lines up with another point from last week: the fact that you no longer wholly control your message. This idea caught a few by surprise, so I reached out to Susan Jacobsen, the president of LUV2XLPR, for her thoughts. As her work bridges public relations and new media, we talked about ways her clients are navigating a rapidly changing social media landscape. While a daunting task to some, Susan suggested that executives look at social media as a means for “engaging with customers while balancing the legal, compliance and risk liabilities.” She continued that “once they make the decision to engage online, whether through Twitter, commenting on blogs or via LinkedIn, it has to be a commitment to continue the dialog and not disappear if they don’t like what they’re reading. Social networks will not go away and neither should they.”

Sage advice to anyone thinking about using these tools to expand their customer experience in 2011 and beyond.

Social Media Series: A little bird told me…

Part one of our Social Media & Financial Services Series

Last week, Fiserv released a white paper on the current and future interests consumers have in connecting with financial institutions through social media. At a time where everyone seems to hype the promise of social media, I admit I read through the report with a degree of analytical scrutiny and yes, intellectual skepticism. While I’m not alone in questioning certain elements of the survey (most notably, that 11% are socially connected to their bank), can we all agree that this “social media fad” just ain’t going away?

twitter-birds-icons.jpgCase-in-point, at our last two conferences, I found myself talking about the various uses of social media today with outside directors of mid-size financial institutions, community bank CEOs and service providers that work with some of the largest banks in the country. Some people get it. Others questioned my lack of concern for privacy and opening myself up to something dastardly.  

Sadly, I think some of the confusion around social media is borne from the rise of the so-called gurus and self-proclaimed experts that have sprouted up in every nook and cranny of the country. While there are quite a few talented professionals supporting our industry, so too are the snake oil salesmen preying on the less informed.

Personally, I turn to sites like Twitter as a business intelligence tool (I want to see what people are saying about us or people we work with) and Facebook to stay connected with friends and family (keeping business totally separate). But these are only two social networking sites available; yet they seem to represent all things good and/or bad when it comes to social media.

I’m here to tell you it ain’t so.

While other articles share technical or tactical advice, I’ve decided to write my next five posts about social media from the perspective of a CEO and the key leadership team at a financial institution. So let’s start with the basics: social networking platforms present a powerful new way to connect with consumers of all generations.  

According to Fiserv, “more Gen Y (ages 21 – 30) and Gen X (ages 31 – 45) consumers utilize these sites; however, a high percentage of the Boomer (ages 46 – 64) and Senior (ages 65 and up) populations also engage in social media. Want some big numbers? Try these on:

  • 94% of Gen Y engage in social media;
  • 90% of Gen X engage in social media;
  • 78% of Boomers engage in social media; and 
  • 65% of Seniors engage in social media.

So according to the technology firm, that shiny new iPad for Grandma might actually be put to good use this winter.

As I said, I don’t blindly accept these numbers. I do, however, think they are relevant to our community. For as technology capabilities continue to expand and evolve — and an ever increasing number of your customers connect to brands and businesses online — I have to ask: are you ready?  

This is not a rhetorical question; to-date, social media is a communication channel that many banks have failed to leverage. So why should today’s financial executives and directors care about social media — and how can they make it work for their institutions? The easy answer? There is gold in them hills: social media blends technology and social interaction; done right, such networking co-creates value for both the bank and it’s customer.  

Social media can take many different forms — not just Facebook and Twitter. The space is ever growing, and incorporates online forums (think the early days of AOL), blogs like this one (or DCSpring21), wikis (hopefully more wikipedia than wikileaks), photo sharing sites like Flicker, video sites like Vimeo and YouTube, and rating or social bookmarking ones like Digg.

social-media-connect.jpgFor financial services companies, social media allows for collaborative projects within an organization (e.g using a twitter-for-the-enterprise tool like Yammer), micro-blogs (e.g. Lincoln Financial’s amazing future self site), and yes, social networking sites (e.g. Facebook).  

But like most things in life, what you and your institution get out of social media coincides with what you put in. Because the big thing you need to come to grips with is the fact that you no longer wholly control your message…at best, you influence it. So as the use of social media tools become even more ingrained in so many consumers’ everyday lives, these are channels you can no longer afford to ignore.

For more on the social media series, please read the following posts:

  • Part 2: Is your bank using social media?
  • Part 3: Authentic – true to one’s personality, spirit, character…
  • Part 4: Getting Up and Running
  • Part 5: A Look Ahead