Social Media Regulation – Part II: Creating Your Social Media Policy

This is Part II of a two part post on American Banker’s “Banking Regulatory Update: New Social Media Rules” webinar. You can view Part I here.

Last week, the Banking.com team sat in on American Banker’s webinar, “Banking Regulatory Update: New Social Media Rules,” which detailed the current policies around social media use by financial institutions. Moderated by American Banker’s own Penny Crosman, the panel of presenters included:

Much of the content of the webinar dissected the implications of the FFIEC’s proposed guidance and how financial institutions can comply. As regulators are looking for feedback on the guidelines by March 23, we spoke to Carl Pry, Senior Director, Treliant Risk Advisors, to hear how FIs are currently reacting to the guidance.

 

Q: What have you seen as the number one risk management issue for financial institutions on social? Can you elaborate on a way to avoid this situation?

The most critical risk management issue for banks regarding social media is the lack of awareness and oversight. Many institutions are taking a wait-and-see approach when it comes to social media, to their detriment. Institutions that don’t address this issue in the present are missing an opportunity to connect with a demographic we all want to reach: the young and technologically capable. But the risk comes when taking a hands-off approach results in the illusion that the institution is simply not participating in social media. Chances are that you are – your employees are – using social media every day. Without a clear social media policy and procedures, without guidelines on what can and cannot be said, you may be violating certain laws and regulations without even knowing it.

Avoiding this situation means getting ahead of the curve by formulating and implementing clear company-wide policies and procedures addressing social media. They should be comprehensive and deal with both company and employee usage of social media. Also, set clear guidelines for consumers and your customers who utilized your bank’s social media sites, as well.

Q: Do you think banks and credit unions should use Twitter and Facebook as customer service channels at all? Why?

Absolutely, although within limits. These are channels your customers are already using in their everyday lives, so why ignore them? They have the advantage of providing more immediate responses than snail mail, that’s for sure. But be aware of the limitations of social media, such as the 140-character limit of Twitter. Can you say what you want to say within 140 characters? For customer service usage, also understand what different social media sites do. You might not want to broadcast specific responses to the masses. Know the way these channels operate and coordinate your responses accordingly.

Q: Do you have any tips for HR policies or training for employees using social media?

Most importantly, make clear to employees what the parameters of usage are. Not how much time they spend on social media, but content of postings. If an employee is posting anything on behalf of the bank, make sure it is subject to the same control and review mechanisms you’d employ for any other sort of communication (such as email). But also be clear as to the expectations of employees posting things on their own accounts regarding their employment or the institution’s products and services. They should know the limits of what not to say, and that if they discuss the bank’s business, all appropriate legal and compliance requirements likely apply.

 

To hear more, check out Part I and our interview with Penny Crosman, editor in chief of Bank Technology News and technology editor of American Banker who shared her thoughts on banks adapting to new guidelines and regulation.

 

Anti-Social Media Hacks

Burger King and Jeep have nothing to do with financial services. But both banking professionals and the customers they serve would be wise to keep a close eye on the fast-food retailer and the automaker as they seek to recover from high-profile hacks this week. It could just be a sign of things to come.

As has been widely reported, both companies this week had their Twitter accounts hacked and, in different ways, defaced. There’s already been wide speculation regarding the perpetrators, but at this point that’s almost less important than the fact that the hacks occurred at all. The primary motive seems to have been to cause mischief, but most such intrusions have a more malevolent intent.

The news of these high-profile Twitter hacks comes shortly after the granddaddy of social media, Facebook, revealed that it was the victim of a “a sophisticated attack. . .that occurred when a handful of employees visited a mobile developer website that was compromised.” Facebook didn’t identify the developer site in question, though it has been identified named elsewhere.

So what does all this have to do with banking?

The reality is that this where many aspects of the financial services industry are headed. And unlike fast food or even cars, this is a practice fundamentally built around private information that needs to be kept secure. The most recent data breaches make it clear that we’re far from that level of security.

Most institutions are already active in the social media sphere, but the current initiatives mainly revolve around marketing and messaging. It seems only a matter of time before at least a few brave organizations make the leap into trying to develop Facebook into a transaction platform and transmit private information via channels such as Twitter.

In some ways, it’s a throwback to the early days of the Internet. The Credit Union National Association reports that a third of all credit unions now offer mobile banking, and all of the rest will have joined the fray within the next two years. That’s nearly twice the adoption rate for online banking when it arrived, which means that we’re already entering the second generation of mobile banking capabilities.

When social media is thrown into the mix, as seems almost inevitable, the growth rate will likely be even more accelerated—there’s an entire generation primed to enter the workforce that has a problem remembering a time before these technologies were fully integrated into every aspect of daily life.

The question is not whether social media channels need to become more secure; the focus should be on how to make them more secure, and who should lead the effort. We already have best practices in place for consumers, but it’s fair to think few will heed the advice. It’s up to us.

There’s no single constituency that can do everything related to security. The banks, the social media providers, the government, commercial and technology vendors—everyone must be involved. We need expert working groups, industry standards and new technologies. And we need them now.

Social Media Statistics: By-the-Numbers, January 2013

Below are some interesting statistics on social media usage. Feel free to share your favorite social media statistics in the comments section or Tweet @bankingdotcom.

  • 200,000,000 – The number of members for professional social network LinkedIn, an increase of 13 million since November 1, 2012. (Source: LinkedIn)
  • 181,000 – The number of Twitter users with “social media” as part of their bio as of January 2013, up from just 16,000 in 2009. (Source: AdAge)
  • 2 – The number of people that join LinkedIn every second, which equates to more than 172,000 new members per day. (Source: LinkedIn)
  • 92 – The percentage of people who share mobile video they have watched on their phone with others. (Source: IAB)
  • 200,000,000 – The number of monthly active Twitter users. (Source: Twitter)
  • 87 – The percentage of US magazine and newspaper publishers that have an iPad app. (Source: Alliance for Audited Media)
  • 33 – The percentage of US Internet users who said they ended a connection with a brand on social media due to the brand sharing too many updates. (Source: eMarketer)
  • 1 Million – The number of websites that have integrated with Facebook (Source: iStrategyLabs)

Did you catch the analysis of the most loved and most hated brands of 2012? Social Media Explorer has the breakdown.

Social Media BandwagonPhoto credit: Matt Hamm / Foter.com / CC BY-NC

Social Media Statistics: By-the-Numbers, November 2012

Below are some interesting statistics on social media usage. Feel free to share your favorite social media statistics in the comments section or Tweet @bankingdotcom.

  • 31,000,000: The total number of Tweets sent on Election Day 2012. (Source: Twitter)
  • 40: The percentage of time spent on Facebook’s newsfeed; only 12 percent of time is spent on profile and brand pages. (Source: comScore)
  • 4,000,000,000: The number of stories that have been read on the Pulse mobile platform since it launched in May 2010. (Source: Pulse)
  • 3,000,000: The number of tweets published along with #sandy and/or #hurricanesandy during the first 24 hours of the storm making landfall on the East Coast. (Source: Topsy)
  • 604,000,000: The number of monthly mobile users for Facebook in September 2012.  (Source: Facebook)
  • 175,000: The number of new LinkedIn profiles created each day as of September 2012. (Source: LinkedIn)
  • 584,000,000: The number of active daily users on average for Facebook in September 2012. (Source: Facebook)

LinkedIn introduced Thought Leader pages in October. Curious who the most followed thought leaders are? Read LinkedIn’s blog here.

Intuit Financial Services’ Innovation Conference: Mobile Trends, Technology Transformation, and Personal & Small Business Finances

In early October, Intuit Financial Services hosted its annual user conference, the Intuit Innovation Conference, in Nashville, Tenn. The conference brought together industry leaders from banks and credit unions across the country, and discussed key topics affecting the financial services industry. To provide a broad spectrum on issues, Intuit hosted an array of esteemed keynote speakers included Steve Forbes, Chairman, CEO, and Editor in Chief at Forbes Media; Tom Kelley, General Manager of IDEO; and, Dan Ariely, behavioral economist and author.

The Banking.com staff got a chance to pull key tidbits from the event, which focused on mobile trends, technology transformation, and personal and small business finances. Below are some top tweets and highlights from the conference:

Mobile:

  • Tablet users touch their financial institution (FI) 30 times per month across multiple devices (tablet, phone and PC) not including text banking touches.
  • Smart phone remote deposit users deposit approximately 2+ checks per month at an average of more than $420 per deposit. Cost savings to FI – $3 each deposit over using a branch.
  • 30% of customers now factor mobile solutions into why they choose their primary FI.
  • Average mobile phone user now spends 12 minutes/day on the actual “phone,” two hours/day doing other things.
  • Mobile is the primary way people interact with their FIs today and growing; mobile banking up 63% to 57 million in 2011.
  • 10% of online banking users are now using their tablet.

Technology Transformation:

  • Web and mobile is eliminating intermediaries like traditional editorial process. Media model of last 150 years has been blasted away.
  • Mobile is changing the media model again. Everything in marketing must be customized to the individual. There are more specialized segments than ever before.
  • Contingent workforce will be 40% in few years (following passions, seeking work/life balance). This offers a new set of financial complexities that financial institutions will need to consider.
  • Digital trends shaping future behavior:
    • World without borders
    • Participatory networks
    • Mobile first & only
    • Humanizing the data
    • Reputation rules
  • “The Digital channel has increased engagement 3x to 32 times/month” – Intuit Financial Services General Manager, CeCe Morken

Personal & Small Business:

  • 2/3 of personal businesses don’t track their mileage for tax time or they track it incorrectly.
  • 50% of small businesses use manual methods (pen paper) to manage finances.
  • Average value of personal business to an FI is $5,000 in revenue per year. Consumer value is $500.
  • Personal small business market segment is growing. Forecast is 32 million by 2018.
  • Personal businesses take longer to make buying decisions than consumers and larger businesses.
  • “74% of #smallbiz owners aren’t wowed by their FI”-Christine Barry of @AiteGroup

A recurring theme of the conference was mobile in the banking industry; how important is a mobile presence to you? Does your FI meet your needs with its mobile solutions? What do you expect from your FI’s when dealing with mobile? Leave us a comment below.

Satisfaction With Social Media Interaction

Guest post by Karen Licker, Social Banker & Content Contributor (Independent) at J.D. Power and Associates

Social media, a non-traditional method of customer interaction is clearly becoming increasingly important for banks to understand.

It’s no longer just a vehicle for customers to vent about poor experiences, praise their bank for exceeding expectations, or read about other customers’ positive or negative experiences—it has now become a legitimate service channel!

Social media sites not only allow customers to interact with their bank, but also provide another medium to converse with representatives, get questions answered, and resolve problems. For example, data from our 2012 J.D. Power and Associates US Credit Card Customer Satisfaction Study shows that during the past 12 months, 5% of credit card customers have contacted their issuer through their social media site to ask a question, resolve a problem, or make a request.

Although many questions or problems may need to be handled outside of the social media site that was the initial contact, it is important for banks to show they are listening to their customers’ “pain points” by providing an actual response to the social media posting.

Did you know that only 60% of customers who contacted their credit card issuer via social media received a reply?

Needles to say, the impact of replying to a posting on overall satisfaction is profound, as Interaction satisfaction among customers who have received a reply to their social media contact is notably higher than among those who did not receive a reply (802 vs. 748, respectively). Findings from our recent study also revealed that optimizing customer satisfaction with their social media experience does not end at merely responding to the request, but that issuers should continue to focus on the following:

  • Resolving the initial issue at hand
  • Offering additional assistance
  • Thanking the customer for their business

When each of these best practices are met, Interaction satisfaction increases to 839, which is 91 points higher than when they are not met.

Source: J.D. Power and Associates 2012 US Credit Card Satisfaction StudySM    

The Bottom Line:
With the continued advancement of technology shifting the way customers interact with financial institutions, it is vital for banks to proactively respond to the changing demands of their self-service channels and understand the importance of being responsive to feedback posted on social media sites.

 

Social Media Statistics: By-the-Numbers, September 2012

Below are some interesting statistics on social media usage. Feel free to share your favorite social media statistics in the comments section or Tweet @bankingdotcom.

  • 20: The percentage of US newspapers that now have online paywalls, twice the number that did one year ago. (Source: News & Tech)
  • 139: The number of Fortune 500 companies with a public-facing corporate blog in 2012, a five percent increase from 2011. (Source: UMass)
  • 24: The percentage of U.S.-based small businesses who claim to currently use social media in a “strategic and structured way.” (Source: eMarketer)
  • 63: The percentage of Pinterest users that are age 35 or older. (Source: Pingdom)
  • 129.7 million dollars in projected US mobile advertising revenue for Twitter in 2012. (Source eMarketer)
  • 235,000,000: The number of people who play games on Facebook each month. (Source: Facebook)
  • 65: The percentage of U.S. grocery retail executives who said they plan to use social media tools like Facebook and Twitter as part of their marketing arsenal within the next five years. (Source: eMarketer)

It’s no secret that smartphone growth is growing rapidly, but a Nielsen snapshot shows that teens and young adults lead growth in smartphone adoption. Read more here.

The Klout-Influenced Credit Score Would Give Credit Where It Isn’t Due

*This post originally appeared on MyBankTracker

If you’re an insufferable person who speaks on social media panels with any degree of regularity, you’re probably more aware of what your Klout score is than you are your credit score. After all, you can check your Klout score all day — you can only check your credit score once a year from each bureau. Who has the time? You live an active social media lifestyle, and retweets probably matter more to you than your mortgage rate. You are pretty terrible. Well we’ve got good news for you: at Movenbank, your social media influence might soon influence your credit score — a terrifying thought!

Movenbank, a soon-to-launch financial services company, launched something called the CREDscore in private alpha. It is comprised of a number of different factors: your actual credit score, your personality and, yes, your social media influence. Strange as it sounds, Movenbank might actually make business decisions based on your Klout — or something a lot like it.

First, Movenbank puts you through a financial personality quiz to better understand your relationship with money. You’re assigned a “type”: salesperson, professor, accountant, rockstar, entrepreneur, officer, artist (wouldn’t want to get that one!), breadwinner or trader. For now, this is just filler, but it might factor into your score in the future.

The CREDscore also takes into account actually important financial information like annual income, how much you save per month, how much you have saved up, and your FICO score. So there is hard data factored into the score.

But users can also connect their Facebook, Twitter, LinkedIn or Google Plus accounts to give Movenbank a better sense of your social media influence. The company explains why in a blog post that describes different credit profiles that a CREDscore could benefit. Here’s Ashley, someone who has fallen on hard times, but has a lot of LinkedIn contacts:

Then there’s Ashley. Ashley’s a bit older than Matt and Jessica, but he lost his job a few years ago. Then he lost his house. Ashley’s suffering. The bank foreclosed and now he can’t get any opportunity to get new things started.

But he has an idea. He wants to launch a new business that makes funky trainers that tweet and check-in on foursquare as you run.

Sounds stupid, but don’t be fooled. According to LinkedIn, Ashley has a heavy influence on some potential investors who are sniffing around the ‘Tweener,’ as he calls it. The only thing is he has a problem. The mainstream financial service providers don’t want to know him.

Here at Movenbank though, we love Ashley.

We love Ashley because we can see he’s on the cusp of a breakthrough. But we can’t just give Ashley all the things he wants, so we offer him a deposit account and a limited loan facility to get the business started. The loan facility increases over time, as his Klout increases.

One reason why underwriters typically rely on hard data when assessing credit risk, is because dangling lots of money in front of people who need it desperately can often make them less than honest. Low-documentation and no-documentation loans are called “liar loans” for very good reason: if you’re self-reporting income to qualify for a mortgage, it’s easy to fudge it upward a bit, especially when your mortgage broker encourages you to. Despite what Movenbank would like to think, it’s very easy to fake social media influence — it’s just a pathetic and humiliating experience most of us would readily avoid. Unless we really wanted a loan from Movenbank, perhaps.

This sort of thinking only makes sense if you’re constantly surrounded by tech entrepreneurs all day, as they network and jockey for money and influence. Most of us never need business loans for shoes that integrate with social media. Our financial needs are personal: saving for our first home, retirement, our kids’ education, a vacation, whatever.

But in its defense, CREDscore addresses these issues, too. A higher CREDscore might mean better terms for customers on their accounts: higher savings rates, lower borrowing costs, or lower fees. Strangely, the range is not yet public; those who have been given CREDscores have not been told whether it is good, bad, mediocre, anything. Just: here’s a number, it might mean something later.

Movenbank will launch to the public later this year. And people with parody Twitter accounts might get a better rate on their savings account than you do. It’s strange, because one might reasonably suspect that introverts might have better financial habits than people who tweet every thought or joke that pops into their head. Being impulsive online is different from being impulsive at Macy’s, sure, but being freed of the rigors of a social life would likely cut 40% of the spending out of my monthly budget.

Klout is likely as good a measure of creditworthiness as waistline. Sure, I can infer a lot of lifestyle differences between the man with the 44 inch waist and the man with the 30 inch waist, but just because one probably spends more of his income on cheeseburgers, it doesn’t really tell me how likely he is to pay back a loan — and it definitely doesn’t mean he’s worthy of lower fees or higher savings rates, or vice versa.

But the CREDscore is still in its testing phase. It’s quite possible that none of this will come to pass. So you can stop spamming LinkedIn VC groups — you might end up burning bridges.

About Willy Staley:  Willy is a 25-year-old writer, and as a native San Franciscan, he is unreasonably loyal to Bank of America, if only for their superhero-like origin story, involving the 1906 earthquake and Italian fruit vendors.

Forget Social, Banks Need to Customize Their Accounts

*This post originally appeared on MyBankTracker

What does it take for a bank to understand its customer base? A whole lot, according to Ernst & Young, which has published one of the most exhaustive and comprehensive studies on what customers expect out of their banking relationship. In a survey of almost 30,000 banking customers in 35 different countries, the study ultimately shows that bank loyalty worldwide has been disintegrating as customers spread their wealth among multiple banks and search for the most convenient ways to access their money.

Customer loyalty isn’t what it used to be — nowadays people want to find the cheapest and most convenient banking experience. In the United States this has caused a 7 percent increase from the previous year in customers willing to switch banks as well as an equivalent decrease in those adamant on staying with their current banks. Customers in the U.S. have also been migrating away from keeping their money in a single bank in favor of opening accounts in multiple banks. Over the past year, the amount of customers with an account at only one bank has decreased from 51 percent to 42 percent and increased in those with two, three or more accounts.

An omni-channel banking world

However, perhaps even more important than the fact that customer loyalty is decreasing are the reasons. The study offhandedly references a term that Cisco has coined: the omni-channel approach to banking. As opposed to the multi-channel approach, where customers are bombarded by the many different ways to access their bank accounts, which do not necessarily coincide or complement one another, the omni-channel approach seeks to enjoin all the banking channels so that they work together harmoniously.

Cisco published an entire study just to explain and present this term only about a month ago. Now E&Y reference it as commonplace: “Move from multi-channel to omni-channel distribution: Banks need to look beyond multi-channel distribution, recognizing that customers care more about convenience than about channels.” Coupled with the data that consumers have been leaving their current banks, both partially and fully, it seems that consumers are already choosing which channels they prefer to access, whether or not banks are prepared.

Consumers prefer different channels for different banking functions, which the study only breaks down based on simple or complex transactions. But with all the different channels — branches, call centers, email, mobile apps, etc. — banks must understand which are most appropriate and when.

Banks must also understand that social networks currently are pretty much inept and any efforts to engage customers on social networks either fall short or are simply not worth reporting. Only 13 percent of customers use social networks to discover a bank’s products and services — and it goes down from there. Compare that to China, where it’s at 81 percent of customers.

Customize

The answer for banks trying to garner broad customer loyalty is not reaching out over Facebook or Twitter or even connecting with customers, it’s in personalization. Customers need to see that banks are versatile and flexible. While they search for the right bank to fulfill their needs, banks should be asking themselves, “How do we ensure that we are the ones filling those needs?” Some customers are looking for the best rates while others look for the best online experience. Still others need more products. With multiple amounts of services offered, banks must tailor them to different customer packages. Customers know what they should be paying for their experience and are willing to pay for certain extras.

Blanket debit card fees placed was a bust, but an essentially comparable fee works on the prepaid market. If a bank needs extra funds, it should increase its service and charge accordingly. In this way it will keep customers happy, while providing a fair value for its service. The omni-channel approach is more than just technology — and it is here to stay.

You can find the full study by clicking here.

About Zachary Ehrlich: Zachary holds a B.A. in English from the Macaulay Honors College at Queens College, has a strong passion for writing and transparently explains relevant nuances in personal banking. Zachary has banked with CitiBank his whole life and recently opened a checking account with Capital One for its competitive rates overseas as he lived in Italy for 6 months. Follow his tweets: @ZachEhrlich

Social Banking: Blessing or Curse?

While the topic of Facebook and banking has generated plenty of heat (though not necessarily a lot of light), the debate seems mostly focused on two broad issues: The much-maligned IPO, and the notion that the company might take business away from the banking sector, such as through Facebook Credits or a self-branded credit card.

The IPO, of course, continues to stir debate—just this week, it was reported that UBS AG, Switzerland’s largest bank (by assets) took a hit of more than $350 million, nearly half its entire second-quarter profit, on the ill-fated deal. (UBS now plans to join several other brokerage institutions readying legal action against NASDAQ). As for Facebook serving becoming a financial institution itself, the mobile payment system for third-party developers got a facelift recently, and there’s now a better subscription billing system.  However, speculation still seems further along than reality.

But there’s another strain emerging that might have even greater ramifications. This is where global financial services conglomerates enable individuals, and perhaps businesses, to do their banking via Facebook.

It’s not as if banks aren’t aware of Facebook—they all have a presence on the social network platform, and quite a few have built branded communities on it. However, that’s still more marketing than finance. What’s happening now goes quite a bit further.

Much of the early action seems to be coming from overseas. First National Bank of South Africa, ASB Bank of New Zealand and Commonwealth Bank of Australia are all launching apparently major initiatives to capitalize on ‘social banking.’ Essentially, the plan is to enable peer-to-peer (P2P) payments over the network between ‘friends.’ Of course, it almost certainly won’t stop there: It’s easy to envision a future in which virtually all consumer transactions, including bill payments, are done over Facebook, since just about everyone and everything is a member anyway.

For the record, skeptics are already out in force, warning consumers that blurring the line between a bank and a social network could bring serious problems. But it may be too late to put the genie back in the bottle. While somewhat smaller financial institutions can be perceived as risk-takers, Citigroup is something else entirely. That financial powerhouse is now asking customers whether they would do their banking via Facebook. It’s also been noted that JP Morgan Chase actually has more ‘likes’ on Facebook than Citi, and is surely looking for ways to monetize that advantage. Besides, as more financial transaction are conducted via mobile applications, the prospect of drastically altering banking practices doesn’t seem nearly so outlandish.

Looking ahead, it’s important to understand that any wholesale change in banking will not take place in a vacuum—Facebook will change, along with user habits, security measures, regulations, etc., before that happens. While it already counts a sixth of the world’s population as members, Facebook is still simplistic in terms of its interface and primitive in its technology underpinnings. Look at the typical user interface—there’s virtually no distinction permissible between different categories of ‘friends,’ or non-transparent and secure ways to do much business. That’s almost surely going to change.

Most consumers now do almost all their communicating via Facebook, just as social networking and social media are no longer separate entities but woven into every aspect of our lives. At some point, everything will become, in some sense, ‘social.’ The idea that banking can somehow stay immune is naïve. Instead of resisting it, let’s just do our part to make it easy, secure and profitable.