In past posts, I touched upon some of the benefits of social media usage in the banking industry and highlighted some of the ways in which several of the leading banks are utilizing social media effectively to take banking to the next level. There seems to be many positive reasons why banks should jump on the social bandwagon, and jumping they are! Social media offers banks new and exciting ways in which to market to and communicate with their customers. It breathes new life into a rather stuffy industry and allows banks to form more personal relationships with their customers. This personal communication has the ability to build trust and brand loyalty in an industry that is finding it increasingly more difficult to offer unique products not already offered by its competition. Although social media may seem like a godsend to many, it is extremely important that we not neglect the other side of the coin. We must always ask, are there also risks of using social media? And if so, what can be done to lessen the severity of the risks?
Well, it should come as no surprise that in banking, like with any business, there are risks involved. That will always be a given. Add to that the informal and largely insecure world of social media, and it sounds like a recipe for disaster. However, it should also come as no surprise that the banking industry is one of the most heavily regulated industries in the United States, and many times those existing regulations flow into the social landscape to help keep banks and customers safe.
So what risks are involved when banks enter the social arena?
Compliance and Legal Risks
Of course, since the banking industry is so heavily regulated, there is the risk of violating compliance standards, which could, of course, lead to legal risks. (Ouch! This social media stuff is getting heavy!) Thankfully, though, many of the compliance and legal risks are things that banks already deal with in the real world every day. So, they should already have a pretty good grasp on what should and should not be done. For instance, depending on the nature of social media usage, banks need to still be aware of and follow guidelines pertaining to things such as:
The Truth in Lending Act, The Equal Credit Opportunity Act, The Bank Secrecy Act, Anti-Money Laundering policies, Regulation E – Electronic Funds Transfer Act, Regulation CC – Expedited Funds Availability Act, CAN-SPAM Act, Telephone Consumer Protection Act, Title V of the Gramm-Leach Bliley Act… just to name a few!
So, they’ve got their Act(s) together! Well, banks still aren’t in the clear in regards to social media risks. Just as scary (if not, more scary) are the reputational risks that banks can endure when engaging in the social landscape. These risks can be in the form of consumer complaints, privacy concerns, fraud (phishing and other scams), and even employee usage issues.
Any one of the issues listed above could be severely detrimental to the brand’s image. Now, think if several risks occurred at once? That would be one hot mess that I wouldn’t want to clean up! And with the number of risks out there, it is quite possible to be dealing with several issues at once, all while trying to maintain the loyalty and trust of customers.
As if compliance, legal, and reputational risks weren’t enough to scare banks away from using social media – there are also operational risks they must endure. Operational risks would be things such as inadequate or failed processes, systems, or people, which could result in very serious matters, such as a data breach or an account takeover. There is nothing that can kill the trust of a customer faster than leaking their personal and/or financial data. Operational risks are a very real and very scary risk for banks.
So yeah, there really is a lot that can go wrong when dealing with an industry that is in essence entrusted to secure our financial and personal information… and then having them mingle on social media. It really is a fine line they must walk in order to be secretive, yet social at the same time.
We’ve learned about the many risks associated with banks using social media – but what can be done to lessen said risks?
Well, enter the FFIEC! The Federal Financial Institutions Examination Council recently constructed compliance policies and procedures that govern social media activities for the banking industry. Since social media is still in its infancy, the banking industry has kind of been engaging in somewhat of a Wild West manner, with no real guidelines pertaining to social media. Now, the FFIEC has given the industry guidance in effectively engaging in the social landscape while mitigating risks. So, yes, even more regulations for the already heavily regulated. But, what can you do?
Basically, banks are instructed to have a risk management program in place that allows them to identify, measure, monitor, and control various risks in regards to social media usage. Some of the features of the program include the overall governance structure for senior management, policies and procedures to monitor social media usage and to remain in compliance, a due diligence process for third party relationships (such as with Facebook, Twitter, etc), employee training for the proper (and improper) use of social media, audit and compliance measures, and reporting parameters to evaluate the effectiveness of social media usage in relationship to the bank’s overall goals.
So, overall, the idea is to plan ahead and make sure all the little duckies are all in row, much like they already do in the real world. By having a risk management program in place, banks are more likely to mitigate a risk in the early stages before it becomes a huge problem. Like I said, there will always be risks in banking and in social media. But, by being prepared, banks will be better equipped to effectively manage those risks – all the while building trust and brand loyalty amongst their customers.
All images courtesy of FreeDigitalPhotos.net
Banking timeline: branch banking > ATM banking > online banking > mobile banking > Social Media banking?
Banking has come a long way over the years. In the not-so-distant past, you would go into a branch and spend what seemed like an eternity waiting in the teller line to conduct a transaction. This method worked just fine for many, many decades. However, as our lives became more hectic, we had less time to spend in those pesky lines.
Enter the ATM (Automated Teller Machine). Now, instead of standing in the teller line, you had options. You could stand in the ATM line! Although ATM banking was met with skepticism in the beginning, it eventually took off and became all the rage – until our lives became even more hectic, that even finding time to stop at an ATM was a major feat.
Enter online banking. Now instead of waiting in lines at all, we can conduct most banking transactions in the privacy of our own homes. Although online banking was met with skepticism in the beginning, it eventually took off and became all the rage – until our lives became even more hectic, that even banking online at home was a major feat.
Enter mobile banking. Now instead of doing our banking at home – we can now do our banking while out and about, say, at a red light! Although mobile banking was met with skepticism in the beginning, it eventually took off and became all the rage – until our lives became even more hectic, that even banking online randomly in public was a major feat.
Enter social media banking. Now, we can do our banking without even leaving Facebook. How convenient is that? Pretty dang convenient if you ask me. But, ahem, social media banking is currently being met with skepticism! Can you believe it? However, I’m sure, if history teaches us anything, it will eventually take off and be all the rage! Then, we’ll quickly be whisked away to the next new form of banking, which will also be met with skepticism. And will also become all the rage.
With that being said in oh so many words, I would like to introduce you to one of the fearless banks who is now offering some banking capabilities via a Facebook app. Ing Direct’s (Canada) Orange Snapshot application integrates mobile banking with Facebook and allows users to view their account balances, history, and pending transactions, as well as view current rates. Although the capabilities are currently limited, they plan to offer much more in the near future, such as the ability to conduct transfers, make bill payments, and email money transfers.
Their main reasoning behind establishing a Facebook banking app is the fact that so many people are regular Facebook users, thus, they are providing a service to their customers by meeting them on their turf. Furthermore, according to Zion Bank (check out the nifty infographic below), 60 million people use online banking, and, coincidentally, 60 million people also own a mobile phone. 83% of people have paid a bill online in the past year, 77% have viewed their balance, and 62% have transferred money. It’s obvious that with the amount of online bankers, combined with the amount of mobile phone users, combined with the amount of Facebook users – that there has to be a huge market for social media banking apps, even if the users are skeptical now.
While the main issue on everybody’s mind when discussing new banking trends is privacy and security, the Facebook app allows read-only capabilities and customer information is stored outside of Facebook. It is also interesting to note that Ing has been experimenting with voice recognition capabilities to ensure even higher standards of security for their mobile apps. Like with all previous forms of banking, there are strict methods that need to be in place first in order to provide privacy and security when dealing with personal and financial information. Ing is currently working with IBM to ensure all security methods are in place.
So, what do you think? Do you think social media banking is the next new thing? Or, is that pushing the envelope too far? Would you feel confident banking on Facebook? Or, are you part of the skeptical crowd?
(Infographic Source: https://www.zionsbankblog.com/personal-finance/new-online-banking/)
(Top Photo Source: (http://socialmediasapiens.com/industries/banking-financial-services/)
Although many people may not automatically associate something usually considered “cool and hip,” like social media, with something oftentimes considered “stuffy and boring,” like banking – the truth of the matter is these two things can, and do, quite successfully go hand-in-hand. In fact, with the ever-increasing rise in online and mobile banking, much of the industry’s customer base is already actively online. Thus, social media provides an excellent avenue to reach out to customers and build truly unique relationships often not possible with traditional forms of marketing and communication. Like it or not, social media plays a large role in many, if not most, aspects of our lives – and banking is no exception.
Although some banks and credit unions have been a bit slower on the adoption of social media, it may be surprising that a vast majority is jumping on the bandwagon – and some are even taking social media by the horns and creating a completely integrated online presence amongst the many platforms.
You may be wondering what banks have to offer customers in regards to social media. I mean, they already have online banking, right? What more could customers need?
Well, the three most utilized social media platforms currently in use by banks are (1) Facebook, (2) Twitter, and (3) YouTube – with each offering their own benefits to customers.
Setting up a Facebook presence is probably one of the first things banks, or businesses in general, do when they first engage in social media. Facebook is a great platform for banks to provide information on, market, and promote various banking products – much as they would traditionally. But probably more important, Facebook is an excellent way to engage in community building and providing top notch and almost instantaneous customer service and support. In addition, Facebook provides the convenience of connecting to different segments of the population, so that information is relevant to the end user. Furthermore, an online presence, such as Facebook, really adds to the transparency of the bank which may help to instill trust within the community and the bank.
While Twitter can offer many of the same benefits as Facebook, it is done in a much faster pace and within 140 characters. Twitter is most often used to provide corporate information, financial tips, and customer service in the form of Tweets. It’s a great way to reach a large amount of people in a short amount of time.
The great thing about Facebook and Twitter is that they can be used together to form a solid social media presence. Also, be on the lookout for future capabilities with both platforms such as conducting day-to-day banking activities via social media. For instance, JP Morgan Chase already has a Facebook page where college students can apply for credit cards, and Fiserv has a Facebook-based application, known as MyMoney, in which users can access and monitor their bank accounts. Although many people are still skeptical when it comes to actual banking via social media platforms due to security issues, this may be something that becomes more commonplace in the future as social media advances.
YouTube is an excellent way for banks to inform customers about various products or financial tips. For instance, U.S. Bank offers a handful of humorous videos to connect with customers and provide useful information pertaining to online and personal security. By using humor, U.S. Bank was able to provide important information that may otherwise be ignored due to the boring manner in which it is presented – such as disclosure booklets. The videos went viral and were a huge hit, and hopefully made customers think twice before sharing important banking information. Online videos also provide banks a way to showcase their traditional marketing commercials, as well as videos created specifically for the internet.
These are just three of the many social media platforms available today. As always, it is important for banks to first research their customer base to determine which platforms their market is currently utilizing, and then establish a presence on those particular platforms.
So, does your bank currently engage in social media? And if so, how do they stack up against the competition?
Well, luckily for you, Social Media Explorer recently teamed up with The Financial Brand and created an algorithm to determine the top 100 banks and credit unions on Facebook, Twitter, and YouTube. The resulting list, called the Retail Banking Power 100, is an amazing testimony that social media really does add value to the banking industry.
See, now who says banking and social media don’t mix? There’s a list of 100 successful banking institutions who would probably beg to differ!