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

Social media is the hot topic right now. Bank and credit union executives devour every article on social media in retail banking that they get their hands on. But a funny thing happened somewhere along the way. It seems journalists, reporters and other industry correspondents decided social media was a fore drawn conclusion.

Journalistic objectivity? Phbbbtt… Social media’s new. It’s awesome. It’s obvious. Everyone should be doing it.

Many media stories about social media in the financial industry adopt the presumptive stance that there must undoubtedly be inherent strategic goodness in it. Read through articles today, and you’ll get the distinct impression that the ROI of social media has been established and accepted. Yet seldom do you ever see any real evidence proving the value of social media. Sure, there are plenty of ideas, lots of suggestions, the occasional fact or two, and many financial institutions are running experiments. But the actual proof points are few and far between.

It’s one thing when vendors and industry trade publications outline the strategic variables an organization needs to evaluate before undertaking a new initiative — something like social media. But it’s dangerous when a fetish for innovation and all-things-new morphs into a blanket recommendation: “all banks, all credit unions, everywhere, never mind objectives, regardless of size and despite the audience need to embrace social media.”

The Financial Brand has assembled a collection of articles and media stories about social media in the banking space. Take a look and see what you think.

Key Takeaway: You need to add a healthy does of skepticism to your diet of social media press. There may be strategic reasons for financial institutions to deploy certain social media tools in some circumstances, but “everyone else is doing it” and “they told me to” don’t cut it.

On Wall Street, Social Media Needs To Be A Leap Of Faith

“Financial institutions are increasingly (albeit still slowly) jumping on the social media bandwagon. They know they must have a presence on Twitter and Facebook, but they have no way of measuring ROI. And they still don’t know how to best use social media sites to communicate with their clients. But they still need to do it.” — Wall Street & Technology

Food for Thought: How many things does your organization undertake simply on a “leap of faith?” Is it typical for your management team to make impetuous business decisions? What will happen if your financial institution doesn’t have a presence on Facebook or Twitter? What’s the downside? Aren’t the risks (or gains) impossible to quantify when there is “no way of measuring ROI?”

Banks Must Adopt Social Media For Their Customers Sake

“Are financial institutions shooting themselves in the foot? Experts certainly think so, and say that banks lagging in social media adoption are vulnerable to being overshadowed by their faster-moving competitors.” — Finextra

Food for Thought: Who are “the experts?”

Social Media Crucial for Finance Brands

“Retail banks have largely remained on the sidelines when it comes to leveraging digital channels.” — Warc

Food for Thought: This is not really true. Retail banking is one of the most active industries in social media today, ranking third in one study. Another study found that 3 out of 4 credit unions are currently using social media.

Banks Spooked by Social Media

“Just why have financial institutions been so slow to harness the power of social media to boost their reputations? Fear about losing control over their corporate image may be holding them back, communication experts say.” — Financial News

Social Media Is a Gift for Banks

“Social media is a gift — you have customers freely sharing their thoughts and ideas and needs and their complaints. Organizations should have an enterprisewide social media strategy that involves marketing and the contact center.” — Bank Systems & Technology

Food for Thought: An analysis by The Financial Brand found that, on average, banks and credit unions will only find one person per month talking about them on a social media channel for every $100 million in assets they have. Some organizations (as in “the very largest banks and credit unions”) should apply the resources needed to address consumer issues via social media, but most financial institutions aren’t going to find many — if any — social mentions.

Why Are Banks Resistant to Social Media?

“It seems as though many bank marketers approach social media with a lot of skepticism and fear, rather than embracing the potential opportunities it offers.” — Market Rates Insight

Why Banks Need to Step Up in Social Media

“Banks need to reach out to younger, more web-savvy customers… using the power of social networking and other digital platforms to improve their marketing.” — Brand Channel

Embrace Social Media Within Banking

“Despite its intimacy, immediacy and credibility, few banks are considering using social media to deliver customer service. Are banks, which have traditionally been less enthusiastic about adopting new technology than other industries missing out on a big opportunity by staying away from the social networking phenomenon? Worse, are they exposing themselves to the threat of retailing giants like…Wal-Mart. If [banks] wait much longer, they may be forced into a situation where a social media presence is no longer optional, but rather an imperative to stay competitive.” — Bank Innovation

Social Media Provides Worldwide Exposure for Credit Unions

“Our social media strategy started as just a foray on the web in order to see what channels were available and then see what we could do from there.” — James Marshall, Marketing Assistant/Plane Saver CU (at Landmark Image)

Food for Thought: Is there any credit union on earth that needs “worldwide exposure?”

Credit Unions Need to Capture the Social Transaction

“For those in the tech industry that see Facebook as a daunting and large, useless network, I would challenge you to find a more relevant and quicker technology change in the last 10 years. Other than mobile (which goes hand in hand with social networking, by the way) there hasn’t been anything this transformative since the arrival of email or the internet itself. It has fundamentally changed the way we communicate and connect with people.” — Credit Union Times

Food for Thought: Social media proponents frequently mention that there are “500 million users on Facebook.” As impressive as that statistic may be, it isn’t a persuasive argument to get involved with social media. The real question is how many of those 500 million on Facebook are you targeting? How many will you be able to engage with? And how will you go about doing that? What is your message? What are you trying to accomplish? While social media has certainly transformed the way with which people communicate with one another, its impact on B2C communications remains fuzzy for most organizations in most industries.

Social Media Lend Banks a Helping Hand

“Lenders around the world have been slow to embrace social media, mainly because this novel form of communication represents a whole new way of thinking about their business. But one of the biggest challenges that banking faces could become a huge opportunity.” — Business Review

Food for Thought: Social media is a game changer? Forcing banks to reinvent their business models? Really? How so?

Banks Go Social to Collaborate, Reach Customers

“Every bank is already involved in social media, whether that’s part of a conscious strategy or not. Social media is becoming a language of commerce.” — Computer World

Social Media Becoming Competitive Differentiator for Banks

“Oddly enough, however, most banks are still reluctant to embrace social media. Those banks not planning to embrace social media will lose competitive ground.” — Market Rates Insight

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This article was originally published on August 8, 2011. All content © 2018 by The Financial Brand and may not be reproduced by any means without permission.

Comments

  1. Mark Arnold says:

    I appreciate the contrarian view on social media: it is a voice that needs hearing. More than anything else, social media MUST be strategic. The classic business principle “begin with the end in mind” applies to social media. What does your bank or credit union hope to accomplish with social media? That question must be answered BEFORE going down the social media road. When it comes to social media, strategy must trump fads.

  2. Thanks for posting this article. I appreciate that it raises the question if, and how much social media is right for your financial institution. My name is Cristián and I’m the director of marketing and editor for social media initiatives for Mango Money. We are a prepaid card company with an online and retail presence. Although relatively new in the social media space, we’ve already started noticing tremendous benefits to our efforts. Social media is a valuable tool that allows us to be part of our customer’s daily lives.
    Our blog gives us an opportunity to find creative ways to educate our consumers on smart ways to manage their money. Creating and managing daily content isn’t easy but we find that our commitment goes a long way in creating a better experience for our readers. Our newly launched Facebook page has been an invaluable tool in communicating with our customers when they have both, positive and negative feedback. After all, typing a question is far easier for a customer than calling us. On the same token it’s more cost-effective for us to respond via Facebook (when appropriate) or to take the initiative and call our customers in response to their questions.
    Regarding ROI on social media, these are some positive things to consider: Increased organic traffic to your website (this means lower cost for paid ads as well as a reduction per acquired customer), decreased calls to your call center, instant feedback, more in-depth knowledge of your customers, and a more personal and fun brand experience, which can be translated into longer-lasting customers and more referrals.

  3. “Food for Thought: Social media proponents frequently mention that there are “500 million users on Facebook.”…

    Really? TechCrunch, and just about everyone else following social media, reported that Facebook hit 750 million users at the end of June….750 million…500 million…

    Key Takeaway: You may want to take a second look at your core assumptions regarding social media…

  4. Glen, the article is quoting what stories within the financial space have said. As we know, the financial industry can be a bit slow on the uptake 🙂

  5. 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!

  6. 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.

  7. 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.

  8. 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.

  9. Kasey Skala says:

    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.

  10. Kenny Lewis says:

    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.

  11. 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.

  12. 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.

  13. 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.”

  14. 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.

  15. 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.

  16. Kenny Lewis says:

    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.

  17. 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.

  18. Kasey Skala says:

    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.

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