The recent Facebook scandal over illicitly distributed personal data has thrust social media into the spotlight, but banking is a sector that faces stringent compliance over privacy. So how are US banks using social media channels to best engage customers and promote their business? Jane Monahan reports.

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US banks’ use of social media is still at a formative stage. In a 2017 survey by the American Bankers Association (ABA), one-quarter of the 800 banks polled said they had been participating in social media for five or more years. One-third had been using it for three or four years, 18% for one or two years, and 12% were still getting their feet wet, having used it for less than a year.

The opportunities and challenges for banks using social media are also evolving. According to the ABA study, 76% of US banks believe having a presence on social media platforms is important to their business. This is unsurprising, given that the target audience of online, mobile and socially connected consumers has been mounting year by year (reaching 2.44 billion in 2018, according to ABA estimates), with people of all ages represented, not just millennials.

Keeping up

Indeed, the pressure to keep up to date with technology and cope with the challenges of meeting consumer demands – and the risks of not doing so – is also unrelenting, say US bankers, their technology partners and media consultants. For instance, more and more bank customers want to conduct basic financial business from their smartphones or other digital devices 24/7, and without the need for cash or visiting a branch.

At the same time, customers are increasingly concerned about the security and protection of their personal data. Such concern reached a turning point two months ago with revelations that a UK-based voter-profiling company, Cambridge Analytica, obtained the data of 87 million Facebook users without their consent and used this to help Donald Trump’s US presidential campaign in 2016.

Facebook founder and chief executive Mark Zuckerberg made an unusual apology in a conference call to journalists in early April. “For the first decade we really focused on all the good that connecting people brings. But it’s clear now that we didn’t do enough. We didn’t focus enough on preventing abuse. That goes for fake news, foreign interference in elections, hate speech, in addition to developers and data privacy. We didn’t take a broad enough view of what our responsibility is, and that was a huge mistake,” he said.

During two days of congressional hearings on April 10 and 11, Mr Zuckerberg reiterated this apologetic line. But he was vague about what his company is going to do to fix the problem, telling legislators: “I’ll have my team get back to you. The details matter a lot.”

The upshot is that it is far from certain that his testimony has either reassured the public or mollified lawmakers, say commentators. The basic problem, they say, is Facebook’s business model. It gives customers free things such as birthday reminders in exchange for their personal data, which digital marketers then use to sell products, ideologies and candidates.

For their part, opposition Democrats and ruling Republicans reached a consensus in Congress that privacy legislation is needed. But it is highly unlikely to be enacted any time soon, and certainly not before November 2018’s congressional elections.

Progress so far

But notwithstanding the current issues, how have US banks been engaging in social media so far? And in what ways, if at all, are they measuring the effect of their engagement on their business?

Initially, US banks used social media for basic customer service. Bank of America, one of the first to actively participate, and the second largest bank in the country by assets, started posting alerts about the weather and announcements, for instance, on branch closings, on a Twitter handle in January 2009.

Banks also used the platforms to sponsor community events, outreach that continues to be popular with followers, and a natural fit for the US’s 5000 or so community banks. 

Take Citizens, a small bank in Edmond, Oklahoma, that is more than a century old. In 2014, it launched a street festival every third Saturday from March to October, using Instagram and a hashtag for the event where people shared photos to raise awareness. Now a fixture, the event has the feel of a bank-customer appreciation day, planned for and run by bank staff, with food, music and local shop and business stands. From an initial 500 attendees, in mid-2017 it was attracting up to 30,000 people, almost one-third of Edmond’s population.

A further feature of social media is that community and regional banks find it an equaliser in terms of brand advertising. They can do this on digital platforms alongside the biggest US financial institutions without the need to pay the substantial advertising costs of print media and television, for example, that only the biggest US banks can afford. Technology consultants estimate the cost of advertising on the new channels is 50% to 60% less than on conventional outlets.

Cutting through the noise

However, with so many tweets, posts, video chats and so on, it can be a challenge to create content that is compelling or valuable enough to attract users’ attention, let alone convert them into bank customers. US banks post their bank and apps websites on social media but do not, generally, advertise or communicate directly about their services and products. As heavily regulated institutions, they face compliance requirements.

There are also practical considerations. Donna Townsell, senior vice-president and director of marketing at Alabama-based Centennial Bank, a small regional bank with $14.4bn in assets at the end of December, says: “You don’t have the room on those platforms, you don’t have the landscape for all the disclosures that would be necessary [for such advertising].”

When a consumer makes a negative comment online it can go unanswered or you can treat it as an opportunity to answer them

Kelly Colbert

The ABA study suggests US regulations for banks and other financial institutions on social media are also “deliberately vague”, due to ongoing change in the industry, which can lead to ambiguities and create tension between a bank’s compliance and marketing officers. But, the study says, banks are doing a lot on the new channels to win followers and fans without “product pushes” or advertising, with the aim of building trust and promoting a positive and caring image of the brand and its employees.

The focus on brand promotion highlights one of the many differences of the digital generation and the extent to which content on social media is demand driven. Chris Smith, head of social media at Bank of America, says more than 90% of 18 to 34 year olds follow the brands they engage with on social media. “The brands don’t make that happen. You see people are associating with brands as a generation," he adds.

“If they have a good experience, almost three-quarters of them share that experience [on social media]. It’s amazingly powerful.”

But what can banks do to be interesting and useful while avoid falling foul of regulators? Many post content that is either playful, like a contest, or useful, for instance, providing financial education, advice and tips. They also use video chats profiling loan officers and financial advisers connected to the bank’s relationship-based businesses, such as mortgages, wealth management or retirement planning.

Meanwhile, Facebook provides demographic and geographical tools that help banks target their audience. Sankar Krishnan, executive vice-president of banking and capital markets at Capgemini, a global business consulting firm, says: “From this promising pool, US banks create avenues to draw people to their website and find ways, with new types of analysis, to identify possible customers, so that the organisation can follow up with a message such as ‘Are you interested in my card?’.”

Getting creative

Many banks are using social media creatively, and in a very sophisticated way in some instances, the ABA study says. When Bank of America announced the integration of Zelle, the peer-to-peer payment feature, into its mobile and online banking app in late 2017, it posted a ‘Pay Back a Friend Day’ programme on Facebook and Instagram, encouraging roommates who owed money to see how easy it would be to make this payment using the new technology (and regain their friendship).

Kelly Colbert is head of brand advertising and social media at Minnesota-based US Bank, the seventh largest bank by assets in the country. The bank’s financial education programme targeting young people just reaching adulthood has a vignette with the hashtag 'OneHouseWiser'. She says this raises its profile, without the bank having to push its brand or its products directly, by asking second-time home buyers to give advice to first-time home buyers and leaving it up to them to give guidance. The campaign “is very successful” and helps build trust among young people who may have seen the financial crisis of 10 years ago “in their rearview mirror”, adds Ms Colbert.

Meanwhile, Citizens Bank has a programme called Cash Vault. Employees are given cash to shop at a particular store at a particular time and they take a picture of the store, tweet it, post it on Facebook and Instagram and tag the small businesses and the bank’s websites. Chief executive Jill Castilla says the cross-promotion of the bank and local businesses has “solidified” existing relations and attracted new clients. “They are my main target group because as a community banker I can relate to them. They have similar challenges,” she adds.

US banks are also using social media to recruit new employees and manage organisational change, something Citizens Bank is doing. Before it became the first community bank in the country to introduce a video ATM kiosk that enables customers to have face-to-face interactions with bank tellers from a remote location, Citizens sold all of its branches and consolidated the remaining two into one brick building in Edmond to help defray the investment costs.

“We were able to do this and retain all our customers. We only had net customer growth,” says Ms Castilla. “I think that can really only be attributed to using social media and videos on YouTube to spread the message as to why we were making the change and what new technology we were investing in. We could get ahead of the story before it became a concern for our customers.”

Ensuring compliance

But are there examples of US banks erring in their social media offerings? Yes, says Doug Wilber, head of marketing at Gremlin Social, a web-based firm operating from Missouri that advises some 200 US banks on their social media content. His company regularly finds posts that are either off-brand – that is, not aligned with the brand’s overall message – or not compliant. Also, the ABA says, some banks do not differentiate their content enough, or time it appropriately, with a particular platform.

Over the years, most US banks have expanded customer service on social media to include inbound queries, to provide assistance to customers outside office hours, or if they encounter financial difficulties when travelling abroad, for example. In such cases the request is taken offline and once customer identification is completed, the customer has one-to-one service.

The expansion has accompanied the growth of messaging platforms, such Facebook Messenger and WhatsApp, which are now as big, if not bigger, and growing faster, than the original social networks, as the industry evolves.

But what happens when social media works against a business – such as the recent ‘Delete Facebook’ movement, with users telling friends and colleagues that they are closing their accounts and publicly criticising the platform for not doing enough to protect their personal data?

To avoid such negative publicity, banks usually take criticism made by social media users offline as soon as possible, to discuss the matter privately. But Ms Colbert at US Bank says there can be advantages to facing criticism openly. “When a consumer makes a negative comment online it can go unanswered or you can treat it as an opportunity to answer them. We see it as the latter,” she says.

Measuring effectiveness

To assess the effectiveness of their social media presence, most US banks use ‘soft’ metrics, including the number of ‘likes’, ‘shares’ and ‘comments’ on a post, tweet or video. But a few institutions are probing deeper. In March 2018, Regions Bank, a $124bn-asset regional bank from Birmingham, Alabama, in partnership with SapientRazorfish, a US digital marketing company, announced a new approach, quantifying the value of the bank’s presence on social media channels using hard, return on investment data-centric metrics.

According to Regions Bank's head of social media, Melissa Musgrove, and the head of global social insights at SapientRazorfish, Melissa Read, these evaluate the impact of a bank’s social media involvement on the bottom line in a much more meaningful way. The findings of the new approach, when applied at Regions Bank, were also eminently positive, they add. 

After tagging 9500 social media customers (a mixture of people who engage with Regions Bank for customer care, sales and general fan interactions) the bank learned that the average household revenue of its social media customers was 60% higher compared with its non-social media customers; the average household deposit was 76% higher; the average cross-sell was 59% greater for social customers; and social media customers also had 32% more bank accounts per household.

Moreover, as budgets for marketing, and the headcount of social media teams, are now increasing at US banks, executives will be required to demonstrate more precisely how they are getting value out of their social media presence, Ms Musgrove says.

At Bank of America, Mr Smith says the prime measurement is engagement. “Are folks that have raised their hand in the network, are they engaging with the content? Engagement is really a Holy Grail for us. That’s somebody with their time and their eyeballs saying ‘I find this of value’,” he adds.

US banks are spending a lot of time improving their social media channels, says Mr Krishnan at Capgemini. “They are investing a lot in the channels, and to make sure they are safe. They know their next 50 million customers will come from those channels, especially as every year we are seeing a decline in US branch traffic by as much as 30%.”

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