Comments on: Journalists, Trade Press Irresponsibly Fan Flames on the Financial Social Media Fire

By: william azaroff » What’s the return on that investment?

william azaroff » What’s the return on that investment? — Thu, 18 Aug 2011 14:02:04 +0000

[...] blog posts on Vancity’s social media journey over the last five years. Both Ron Shevlin and The Financial Brand have written very good posts recently on the topic of social media ROI, so I thought I’d join [...]

By: Kasey Skala

Kasey Skala — Wed, 17 Aug 2011 00:48:07 +0000

You say that people “want” Coke and Starbucks, but not banks and credit unions. That’s the thinking that’s causing so many FI to fail at social.

People don’t “want” banks and credit unions, but people do “want” to save money, earn more money and spend their money. Quit thinking of FI as simply a place where people spend and borrow from. Go beyond and think beyond.

By: Editor

Editor — Tue, 16 Aug 2011 17:27:26 +0000

Is social media an effective tool to help convert unprofitable checking-only customers into profitable ones? If that’s the objective, wouldn’t it make more sense to focus on replacing unprofitable consumer behaviors, like branch visits, paper statements, direct deposit, etc., with things like eStatements, remote deposits, mobile banking, online banking + bill pay?

I’ve had a checking-only relationship with a major US bank for nearly 25 years, and I’ve never considered them for another banking product. Never would. That they are on Twitter and Facebook have no impact on this consumer’s feelings. They are a “buck stop,” a place to warehouse money and process transactions, and they excel at it. That’s what they are good for, good at. Lots of branches and ATMs and online banking and remote deposits and the stuff a basic checking customer wants. When I’ve needed different financial products, I’ve sought out financial institutions that specialize in what I need, e.g., a credit union for auto loans, USAA for insurance, etc.

By: Kenny Lewis

Kenny Lewis — Tue, 16 Aug 2011 16:08:53 +0000

To echo what Rob Peters said about profitability. I received this not to long ago from Serge Milman, CEO, Optirate, a firm that specializes in onboarding programs for banks and credit unions. Here is Serge’s comment, “Member profitability varies substantially within and across Credit Unions. It is a function of the type and quantity of products sold. Across the industry, 20% of the members generate more than 150% of the profit — which means that 80% of the members destroy 50% of the profit.

Contrary to popular belief, checking accounts typically lose money for Credit Unions. An average CU will generate $150 or so in annual revenue per checking account but their cost will average between $300 − $400 per account.”

Now, while this statement deals with credit unions, there are certainly parallels to banks as it relates to the profitability factor.

By: Rob Peters

Rob Peters — Tue, 16 Aug 2011 15:22:36 +0000

Thanks for the question. I hosted a Risk Management Association (RMA) Meeting for Capgemini Financial Services in June of 2007 at the Intercontinental Hotel in Chicago. Mark Zandi of (now called Moody’s Analytics) was the keynote speaker. He stated that most retail banking customers are not profitable to retail banks. That is why many are many are trying to transform to wealth management banks. I think if all the retail customer is using is a checking account from the institution than I stand by my previous statement.

By: Editor

Editor — Tue, 16 Aug 2011 14:57:42 +0000

Great points Lee. The differences between Coke and Starbucks vs. banks and credit unions are often overlooked by those within the financial industry. We want Coke and Starbucks. We enjoy Coke and Starbucks. We like Coke and Starbucks. There are very, very few consumers who like, want and enjoy banking. For most people, banking is a "necessary evil" and nothing more.

By: Editor

Editor — Tue, 16 Aug 2011 14:53:58 +0000

Rob, are you sure that “most retail banking customers are unprofitable?” Or did you mean “some?” There aren’t any businesses in any industry that survive very long by (1) serving a majority of unprofitable customers, and/or (2) engaging in a bunch of behaviors that have zero/questionable ROI. Most organizations don’t play roulette, spreading a bunch of bets around on possibilities. They usually invest their energy and capital on things that have a high likelihood of generating sales, revenue and profits.

Why does every bank and every credit union need to walk the path of innovation? Why can’t there be just a few brave organizations who go test and see what works (if anything)? What if the entire industry just follows “the leaders”… right off a cliff? How is an organization supposed to know what new ideas and innovations are the ones they must pursue, and which ones can they wait on? Because with every new thing that comes along, there are always those who say “banks are afraid of innovation,” “this idea is a total game changer,” and “those who don’t get it are toast.”

By: Rob Peters

Rob Peters — Tue, 16 Aug 2011 12:06:17 +0000

Banks and Credit Unions must not let the lack of hard ROI justification stop them from interacting with customers and prospects on social media. Most retails banking customers are not profitable to banks, but that does not stop them from servicing them. Social networking will be the path for differentiating the brand and service through trusted interactions that build Relationship Capital (RC). Banks and Credit Unions understand capital and the quality of customer and prospect relationships is an asset that will appreciate or depreciate. Innovation will occur with Trial & Error before standards are put into place. The operational risk of not interacting is great.

By: Lee

Lee — Mon, 15 Aug 2011 19:17:37 +0000

The problem many of us have with Social Media is not so much the channel, but the experts who have pushed it as THE channel to leverage your competitive advantage and thus this channel will benefit the FI’s hugely. Really? The problem with these statements is they aren’t positioning Social Media as an integrated strategy. Therefore, we have more and more marketers believing, or sold on, this is what they need to do to succeed. While at the same time they can’t tell us who their customers are. I’m not a big fan of Social Media for FI’s because let’s face it are customers really talking about banking in their posts? How much social interaction do they really want from a FI? I think of FB and Twitter as the time away from the real world…Coke has 21.5M Fans, Starbucks 1.2M Twitter Followers. Top 50 FI’s combined can’t compete with that, and why? These brands are active, they’ve tested it (what works for THEM)and now have the resources and know how to get fans involved. Secondly, most marketers, not all, will not know how to use it. Let’s look at the Fortune 100 companies, 82% use Twitter to promote their company news, less than 38% will respond to a Tweeter and 32% re-tweet their company news. Not exactly startling numbers. I’m not negative on the people in our industry and nor do I question their capabilities; some are doing a good job, e.g. Arvest Bank. But I have to ask those marketers who are in favor of or individuals who are pushing their company’s social media expertise, what is your FI or client’s marketing strategies?….How do you currently engage with your customers? When they can’t answer these and other basic marketing questions, but then answer with “…but we are starting a FB page” well, the rest of us are just left scratching our heads.

By: Kenny Lewis

Kenny Lewis — Mon, 15 Aug 2011 00:47:59 +0000

Here’s a novel marketing idea for credit unions and banks. Find a cross section of Echo Boomers/Gen Y (Three 18-24 year olds, three 25-30 year olds and three 31-35 year olds) within your organization with unique automobiles: Scion Xb, Nissan Cube, Mini Cooper, etc. Wrap the vehicles with graphics, something like, I Tweet for XYZ Credit Union, Follow me on Twitter, I contribute posts for ABC Bank on Facebook Follow me on Facebook. Give them a perk for doing it. While they are driving to and from work, shopping, etc. the social media message is getting out. Encourage them to tweet and post on Facebook interesting events within the community and periodically give them a a marketing message to post or tweet. It’s not a large investment and will probably gain a lot of fans on Facebook and a lot of followers on Twitter not to mention the visibility for the credit union or bank.

By: Kasey Skala

Kasey Skala — Sat, 13 Aug 2011 02:36:58 +0000

Not to play Negative Nancy here, but why is it that 90% of your articles/view of social media and financial institutions are negative and full of skepticism?

For all the doubters, I simply point to AMEX, CME Group and Wells Fargo.

The issue isn’t the social media…the issue is the people behind the efforts. If done properly, financial institutions can benefit greatly from social media.

By: Rallas Buttriss

Rallas Buttriss — Thu, 11 Aug 2011 02:49:55 +0000

Generally businesses perform critical analysis on ROI & TCO for all strategic options when they are determining the benefits of a specific undertaking. Yet many are now using the “…because my competitor has one…” as a justification for Social Media and deriving social capital online.

Admittedly the ‘you have to be in it to win it’ arguement does have some weight and, yes, the customers and consumers are flocking to the social networking tools in very vocal droves, but fundamentals should not change.

Understanding the business justification for a decision in this space is no different to the other changes that have occured in the business world previously. Some additional consideration should be given to any new social networking initiative given the somewhat chaotic nature of the financial marketplace today.

Business is still business – just the tools have changed.

By: Langdon Andrews - Pannos Winzeler

Langdon Andrews - Pannos Winzeler — Wed, 10 Aug 2011 17:16:05 +0000

Social media may not yet measured up to the hype but it is changing the ways that people interact with larger brands in measurable ways. Social Media will have a role to play for even smaller financial institutions especially as more banking activity moves online.

Smaller institutions have always thrived on personal connections that take time and investment to build. Social media can nurture those personal relationships with a similar commitment of time and energy.

By: Peter Fletcher-Dobson

Peter Fletcher-Dobson — Wed, 10 Aug 2011 01:02:04 +0000

Financial institutions are in social media now mainly because the customers got there first and, sensibly, use the likes of Facebook and Twitter to good effect in having their issues resolved or being able to vent. For FIs, dealing with customer issues in this open and insecure space is an ROI nightmare – so we spend most of our time asking to go offline where a non-public conversation can happen: e.g. “DM me your phone number and I’ll give you a call”.
The ultimate solution to this problem to create a secure online communications environment where the customer doesn’t feel they have to resort to social media to raise issues. That’s a nirvana I admit…
What I think FIs should be doing in social media is creating engagement and deepening the online relationship – not just seeing social media as an extension of the contact centre. This will require knowledge management and business information teams working hand in glove to deliver the insight and capability for a truly contextual and relevant social media experience.

By: Glen Gilmore, Esq.

Glen Gilmore, Esq. — Mon, 08 Aug 2011 21:35:20 +0000

Fair enough. Thank you for your gracious response to my somewhat (ok, completely) testy comment. I guess that in the rush of the day I was hoping to make a quick point and continue on. If I might add another point or two.

I am one who believes in neither extreme when it comes to social media: it is not a marketing panacea and is not a marketing fad. It is a powerful way for businesses to humanize their brands, connect with their customers, and achieve a real return on their investment of time and resources — and it takes both.

Too often, those complaining of a poor social media ROI, never had a plan to begin with, don’t understand that it’s a forum that places a premium on listening, and fail to realize that building trust can pay a huge dividend.

Now, more than ever, our financial services need to be where the conversation is taking place online — and that place is in social networks. You, in the generic sense, may not like social media, but, rest assured, your clients do. I hope that more of our financial services will study the communications shift that has already taken place and join the social media conversation!

Again, thank you for your graciousness!