Should Banks Bother With Social Media?

Despite concerns about regulation and loss of control, Robert Roessler of MHP Communications argues that social media initiatives are no longer an option for FIs – but a necessity. He shared with PYMNTS.com his views on the specific benefits of social media – both for revenue and product innovation – and weighs in on the key debate: should your employees have access to social networking sites at work?

PYMNTS.com: In your view, what benefits to do social media offer banks?

ROBERT ROESSLER: Social media provide banks with an easy and efficient way to interact with various audiences, including clients, analysts, investors and employees. Some (retail) banks have started using social media to provide their customers with better service by directly responding to enquiries or complaints, whereas others use social media platforms such as LinkedIn to specifically target potential employees. There are now also more activities such as live tweeting from results announcements or specific social media campaigns around product launches or upgrades. In addition, with journalists increasingly on Twitter to research and source stories, banks have the opportunity to interact with the media by offering spokespeople for comment or adding angles to a journalist’s story. Most social media platforms are free to use and can be a useful extension to a bank’s traditional PR activities – they can be used as an additional distribution channel for news for example. If these activities are integrated and part of a wider communications and customer service strategy, social media becomes a very powerful tool for banks in their positioning against competitors.

PYMNTS.com: What are some of the hesitations banks in general have regarding social media initiatives? Do you believe their concerns are justified?

ROESSLER: The two biggest concerns for banks are regulation and loss of control. Regulation currently is vague, and whilst regulators are aware that banks cannot be excluded from embracing social media, they are struggling to create clear guidelines that ensure compliant behaviour on the one hand, but flexibility on the other. This concern is justified, and unless the regulatory environment becomes clearer, banks will understandably continue to be hesitant.

In contrast the perceived loss of control is purely emotional. Banks fear that social media is an entirely uncontrolled environment where stories can be taken out of context without having any means to rectify. However there are legal boundaries and actions that can be taken if false allegations appear online. There is another aspect: Bloggers who do not adhere to journalistic conventions are usually regarded to be irrelevant. Only if they do they can build a trustworthy reputation which is necessary if they intend to monetise their work. It is also worth bearing in mind that in a free press, journalists often re-write press releases, and a TV presenter may ask an unexpected question in a live interview. There has never been and will never be full control over a story or particular message as soon as it gets outside an organisation, and this is no different in social media.

PYMNTS.com: Why are the FSA brief and vague when it comes to social media? How would you suggest they be revamped?

ROESSLER: The FSA currently focuses on setting a framework for the promotion of investment products via social media. But the big problem is data privacy. Social media platforms are typically provided by external third parties, and any data, including the one of a sensitive or confidential nature, is stored on the provider’s servers. These may not provide sufficient protection or peace of mind for the banking sector, and there are rules that this information must not be stored outside a bank’s infrastructure. So when a customer complains about a bank on Twitter, the bank needs to shift that conversation onto its systems.

Another issue is that social media is by nature global. The FSA, as the UK regulator, could impose stricter guidelines to UK based financial institutions. However a division of a UK bank in a different jurisdiction may fall under a different legislation, and is a difficult task to try to cover all operations and activities, which also includes feeding content into social media outlets in different languages.

A revamped FSA brief would hopefully give a clearer reference to the individual social media platforms and how banks can use them – and what they need to be aware of. And they need to be more specific in what banks are allowed to do.

PYMNTS.com: To what extent can social media help drive product innovation for FIs?

ROESSLER: Monitoring conversations in social media helps financial institutions to gain an understanding of what customers want and need, and what they complain about. Banks can also be more active and ask customers to provide them with feedback, or create more specific campaigns. Incentivized, for example, with a prize draw on Facebook, this is a much faster and less expensive way to conduct thorough market research, which can then be used for product development purposes.

PYMNTS.com: Which FIs are leading the way as far as social media integration, and why?

ROESSLER: First Direct are seen as very advanced, they have recognized the value of social media very early, and being a direct retail bank there is a natural fit. They are very open with publishing their customers’ feedback so they are perceived as being honest and transparent. And they are very creative when it comes to engaging the public, stepping away from traditional banking topics. In the B2B area, Nordic banking group SEB has created a social media platform for industry professionals where they can specifically discuss questions they have, share information and post jobs. This is the first externally accessible B2B industry community driven by a bank, and it helps SEB to be seen as an innovator.

PYMNTS.com: Do you believe FIs should allow their employees access to social media at work?

ROESSLER: Yes, they should. There is an issue with reputation when employees complain about their employers in publicly accessible networks, or breach privacy rules. However, this can be addressed by a social media and HR policy, which exactly states the boundaries. When these are clearly communicated to all employees, the benefits – such as using Twitter as an additional research tool or Facebook to follow a competitor – by far outweigh the risks.

PYMNTS.com: Finally, in response to the question in the title of your blog post, should banks bother with social media?

ROESSLER: Yes – they have to. Social media has now become much too mainstream to be ignored by banks, and they need to have a good understanding of how social media works and how they can utilize it if they want to be abreast of their competitors. To navigate round unclear regulation, some financial institutions use social media to promote their CSR initiatives, such as M&G’s sponsoring of the Chelsea Flower Show. So financial institutions do not necessarily have to wait for new regulation to show them the way – they can take an individual route themselves.

Robert Roessler, MHP Communications (www.mhpc.com)

Robert is a senior PR adviser with over 10 years’ experience in the IT, financial services and financial technology sector. Prior to joining MHP Communications, Robert headed PR campaigns for companies in the telecommunications space. He previously worked for Germany’s largest tech PR agency where he was responsible for campaigns across technology and payments.