Why banks won’t do social media

A couple of days ago, I saw Chris Skinner give a presentation in which he advanced a few reasons why social media should be important to banks. His arguments, ultimately, boiled down to one main thing: social networks are where online people are, therefore, they are where banks should be too.

The thing is, I don't agree with that position much. If it were true, why aren't we all doing social media daily? If there was a business reason to be in social media, banks would flock there pretty quickly. It took 5 or so years for the flock to get there with Internet banking, and it will probably take as along for mobile. Social media has been around for more than 5 years, and I'm not seeing much flocking.

Arguments that banks "aren't innovative" or "don't get it" won't fly. The fact is, every bank has people that do get it and who are innovative. They just don't do much in the social space.

Of course, taking the negative position on banking social media is a disingenuous one for me, because I do social media myself here on this blog.

But the thing is, I can see why social media might not be the thing when it comes to a bank. Over the past few days, I've been conducting an experiment: using my Facebook status, I've been trying to see just how ridiculously uninteresting I can get before people dump me.

On the first day, I told everyone that I was still breathing.

On the second, that my heart was beating, and I was counting how many times it did it.

For the third, I said that I'd blinked, but that as it was a normal bodily function, no one should be surprised.

And today, I have uploaded a photo of the specific piece of gravel on which I stand waiting for my morning train.

Here is what I've found out so far: the less useful the content is, the more people engage with it. You'd not believe the string of emails I've been getting.

Now, although this is not an especially scientific experiment, it suggests to me you can build engagement with social media on things that are unimportant and irrelevant. But when you say things which, theoretically, would be interesting and useful, paradoxically, no one cares. Social media is a channel optimised for the insignificant.

Now I'd hardly say that finance and banking are in the insignificant camp for most people. And if that is true, and social media is good for unimportant things, what business does a bank have doing it in the first place?

Oh, you may argue that there are successful bank blogs, and there are some. Bank blogs about banks for bankers and their friends (such as this one, and BankWatch, and Chris Skinner, for example) get decent readership. But we aren't talking to customers, at least not all the time. We're the banking echo chamber.

And if you look at the successful social media experiments, such as VanCity's ChangeEverything, they aren't even about banking very much. VanCity has been clever enough to work out that they have to take a sideways approach.

But that's a special case. The rest of us still believe that customers won't respond to oblique approaches of this kind. We imagine that direct, core messages are all that customers will understand. And we would never dream of using such valuable customer contact to deliver messages that appear, on the face of it, to have little to do with selling product or enhancing service.

"Bother, we've run out of pamphlets again", is hardly the kind of thing a bank would be interested in putting on the net. But "Check out our new rate", is something you see often on bank websites.

My question is whether a venture into the banal would create bank success in the social space. My felling is it might.

Comments

[Chris Skinner]

For the record James, I was not recommending that banks get into social media, but that they get into social banking.

There's social media - blogs, podcasts, etc - and social networking - facebook, bebo, myspace, etc.

These are interesting but nothing to do with banking ... sure blogs and business networks are interesting, but it won't make any money.

But social banking is the Zopa, Smartypig, Prosper and related worlds. These worlds are changing financial business models and are relevant and important.

Equally, social money is PayPal, m-payments, BBVA's tu cuentas and more. These are also changing payments business models.

Are you saying that all these latter examples are totally irrelevant to banks, as that's the bit I was talking about - not social media and social networks.

Chris

[Colm O'Connor]

I think that banks *should* get into social media - in a sense. There is a wealth of important information held by banks - all of my transactions contain a lot of information about me, which, if opened up and contextualized could be used in new and innovative ways.

For instance, I bought flowers from my local flower shop and my friend bought flowers from interflora. He might want to know that I got better flowers at a much cheaper price. Combining the transaction data banks have available with users' social graph, this kind of thing can be done.

You might want to run a competition with your best friend to see who can save more in these credit crunched times.

There are a million other ways transaction data could be combined with the social graph (and other data) to make it more useful.

HOWEVER

A bank will *never* do a good job of making a social network that will do this. It shouldn't even try. It's not your core function, and frankly, you have far more important things to worry about.

What you *should* do is make the transaction data available via an API to select companies with a restrictive contract so that users can opt in to a software service run by a more nimble startup.

The startup can focus on experimenting with mashing up the data in ways useful to the user. All things that a nimble startup full of innovative hackers will be good at.

There is one company that I'm aware of that does this: http://www.mint.com/. They only deal with US institutions for now, but I read that they may approach UK banks soon enough.

The most difficult part of creating a service like mint is, I think, probably dealing with conservative banks who are afraid of letting their data get "out there". It is a bit of a privacy headache. However, with a decent contract, the banks could a) assure the privacy of user data, b) make their service more useful to users and c) collect a wealth of useful data that a company such as mint could provide.

[Mike]

Everyone has a different defintion of what is a successful social network. While Changeeverything.ca has got some media in the past I can't help wonder how successful it is as a community if there are few monthly posts and even fewer who comment.

I could never get this past our company as they would think its not successful given the lack of engagement from the community. I think going forward especially in these tough times, there will have to be some type of measurement or dare I say ROI before companies will look at social media. Thats the challenge.

I really like the idea of Mint.com but I think Colm is right that banks will be hesitant to give up their data. It would be a PR nightmare if there was a breach.

[Sara]

I think we have lost a key piece of social media functionality in our conversation here, gentlemen. Social media is all about social interaction - and every bank is in the business of interacting with its customers. It's how we will attract and retain customers.

But let's get back to Chris' main point of social banking. This is a very valid and more important issue for banks than social media uses. Chris - thanks for trying to spread the message about this. Banks that "get it" will thrive. Those that don't will see their profits die along with their aging customers.

[Thomas Barker]

I completely agree about SM being optimised for insignificance. The assumption of social media is that you're communicating with friends. Nothing of great significance happens to mine, but the insignificant things are still important to me. Your FB contacts will find your slow decent into pedantry amusing because they know you. But a bank having a Twitter channel is just a waste of time. Banks aren't in the business of interacting with customers, they're in the business of helping customers interact with each other.

The reason Paypal was able to grow bigger than almost any bank (and would prob. be eating your retail, if eBay hadn't MBA-ified them) is that they allowed users to send money to an email address. Not a real life person, or an account number. EBay etc made that a vital feature to millions of people within a few years, without the traditional sector noticing. All the logic for doing that would apply to sending money to a FB friend, etc.

Mint et al all use Yodlee to scrape data out user accounts without an API. It just logs in with your name/password, and rips the data from the HTML. (In theory, it could lift all the standing orders etc from one online bank account, and re-enter them into another, without either bank implementing the feature. Paypal did this sort of thing v.aggressively in the past!) So it's sort of already an issue...

The scary thing for banks is not having an active process of observing their customer's working/social environment and actually adapting to it. I occasionally have overseas customers, and it might be easier for me to take a corp. card over Google Checkout than have them wrestle with SWIFT/IBAN. Shouldn't I be able to click a button, and put a tbarker.mybank.com/payme/creditcard link on my site? (That would have killed Paypal too.) *shrug*

That's my comment quota done for this month, off to pub :-)

[Chris Skinner]

Thanks Sara

I must admit, I'm travelling the world spreading that message, e.g. focus on how to leverage the latest web and mobile channels as a bank revenue and customer engagement service.

Latest podcast at the BAI Show last week can be heard here: http://mycommunity.leveragesoftware.com/group_discussion.aspx?DiscussionID=1e78e8033caa4c5ca8de1ae7f332ee14

Meantime, some banks get it, like Wells and BBVA, whilst some don't (no names mentioned James ;) )

Chris

[Neil Robinson]

Guess you guys missed what HSBC's First Direct has just done, eh?

My Little Black Book says you're wrong. See my blog to catch up.

http://www.blog.lanzen.co.uk/?p=244

So banks can't do banal, James?

Marketing Magazine asked people what they thought the most annoying adverts of 2008 were. Apart from the truly awful re-hash of Cadburys "Gorilla" and "Trucks" and DFS's "Air Guitars", we have...

Lloyds TSB's "Journey". the quote was "Death awaits, we'll get you there faster".

Not my words, just social comment. But if Internal Marketing had known that would be the reaction, maybe they could have saved the £2 Million it cost...

Not their fault. They didn't know. They didn't have a social network to tell them.

[Kate Dugas]

Hiya,
I just wanted to chime in here and say thanks for the shout out, and also add my two cents. I am the social media strategist for Vancity and it has been my pleasure to have been nurturing ChangeEverything throughout its two and a half year life so far. I'd like to share that part of our success with ChangeEverything is that it is unflinchingly authentic. Vancity has always been genuinely interested with connecting with people in our community and making it a better place to be through innovation and progressive change, it really, truly is who we are.

Given that for over sic decades we'd had a significant presence in supporting healthy community on the ground, it was a no brainer when the question of whether we'd dip our toe into the world of online communities came up. Gifting Vancouverites with a place online where they could explore and play with the idea of changes they wanted to make in their lives was for us, simply an extension of our corporate DNA.

Every company has its own personality and DNA. Showing up successfully online AND on the ground requires taking a good honest look at who you are, and sometimes admitting who you are not; one can't be all things to all people. From there engaging your constituents gets a lot easier.

Kate

[Colin Henderson]

James - coulnd't disagree more - message here from the echo chamber.

Here is why banks (that survive) will do social media. I picked Lloyds Bank at random, and this link is a google search for this string "I love lloyds bank"

http://tinyurl.com/5sqp2h

Social media is not banner ads in FaceBook. That closed walled garden is all to often picked as the definition of social media but not so. Social media is probably the wrong word anyway - at issue is being where your customers are and having conversations with them.

How do we pick branch locations? We pick them because there are office buildings, residential density, new growth areas etc. Branch managers join the chamber of commerce, and other local associations to meet people and chat with them. This is classic banking 101 and build confidence and trust.

Social media is understanding this new location called internet that is not just essential, but fundamental to Gen X/Y as well as a few older fogies.

Back to the Google search. This simple example exemplifies the conversations about Lloyds Bank whether the employees choose to participate or not.

This is social media.

PS ... glad to hear heart is beating still - always nice to hear in a banker - perhaps a podcast next?

[Neil Robinson]

Ow! You've pulled some heat on this one, James!

I agree with Colin, I'm afraid you may have got this very wrong and that time will show you just how uncharacteristically far out of alignment your logic, knowledge of the medium and thought processes are.

Here's something of interest for you. Ironically, both you and I get a name check!

www.socialmediatoday.com/ClientFiles/2b461d74-0b05-4149-a6fd-33257181a2c7/SMbanking_v1.pdf

[Scott McLean]

I think its is going to be quite a while before the average retail bank (esp. in the UK) embraces social media for proactive interaction with customers and potential customers. Our research and fairly in-depth discussion with at least one high street bank, shows that there is little awareness of even the need for reactive comment to negative (or indeed neutral/positive) sentiment about the banks or their products. Until banks are even prepared to monitor and engage with such social media interaction about them, then I find it highly unlikely that they will go the next step and use the digital world proactively.

[James Gardner]

@Colin and all: such interesting debate. But perhaps I misrepresented myself in my post. I think the point I was trying to make was that a bank would be successful in social media if it would allow itself to be banal - this goes to the vanishing point of news, in fact.

But we don't do stuff like that. We like to reserve our limited opportunities for communication to very big, very important messages like (gasp) an interest rate change.

[Erin McCune]

From my perspective, banks should proactively participate in social media, not to make money as Skinner argues, but to dialogue with current and prospective customers. Particularly during uncertain times as the long term prospects for banks - large and small - are questioned, bankers should reach out and engage with their customers online. Of course, social banking (Mint, Wesabe, Prosper, etc.) and social payment (PayPal, Facebook's Spare Change) are direct competition to banks' traditional services and, over time, banks will have to participate, or be left with the commoditized payment execution on the back end. But in the immediate term, simply dialoguing with customers via social media will enable bankers to a) learn about social media, b) better understand what their customers want and the services they are likely to adopt, driving prioritization of scarce resources, and c) remain relevant and top of mind as customers face intense financial anxiety.

[Colin Henderson]

@eric - thats it - well said.

[Steve]

I define 'social media' as content within a social space. Why wouldn't banks want to embrace social content...for all the reasons Erin highlights.

People used to say 'Content is King'....nowadays it is 'Queen' and 'Community is King'

[JJ Hornblass]

As someone who is manning a social network for bankers at BankInnovation.net (in the echo chamber, it would seem), I am encouraged by this debate. Just talking about the implications of social networking and banking is something that wouldn't have happened in days past. Bankers would have dismissed such New Age-y technology as the domain of Steve Jobs and the like, not bankers.

But we are in a different era today, one in which ideas are considered openly, and social networking and banking is good idea indeed. Ideally, social networks are perfect vehicles for bankers, as my good friend Colin Henderson wrote:

"How do we pick branch locations? We pick them because there are office buildings, residential density, new growth areas etc. Branch managers join the chamber of commerce, and other local associations to meet people and chat with them. This is classic banking 101 and build confidence and trust."

This is absolutely true and it mirrors what could be if bankers embraced social networking. A traditional banker was that upstanding member of a community who dealt with money -- deposits and loans. They knew their community deeply. In a social network, a banker could likewise occupy an invaluable position within the "social graph."

To elaborate, a "social networking" interaction is different from the type of social interaction James sees here. James's "photo of a piece of gravel" experient exemplifies it perfectly and percisely. In a social network, the minutia, that amazingly personal information of a user creates a greater bond than, say, these comments on blogs. A social-network interaction is based on much more knowledge. The last post in this thread was by "Steve." I have no idea who "Steve" is (I am sure you are a wonderful chap, whoever you are). But on our site, BankInnovation.net, for example, I can learn much more about any member and interect accordingly. That matters in the social dialogue. It makes for a deeper dialogue -- one that could greater benefit bankers. Could you imagine if your banker really truly knew who you were and what you needed, not just what is your credit score today? I would hope such knowledge would generate much deeper dialogue than "our rate is 6.75% on a 30-year fixed."

Ah, if only banking could embrace Facebook, et al! I am afraid this will not happen anytime soon, because we have all ignored a key component to any banking discussion: compliance. I cannot imagine how a Facebook "friendship" could be regulated today. Could one of the current banking monoliths (they're becoming more monolithic by the day -- but I digress) truly "control" a Facebook "friendship"? I would suggest it could not, at least for now. Much thought and processes will need to be developed before such a social networking project is embarked -- particularly in today's regulate-regulate-regulate, post-financial-crisis environment.

Colin is right: social networking fits banking. One day in the (too distant) future he'll be proven right.

[Thomas Barker]

My bank probably doesn't make more than £80 a year out of me, which simply does not justify a person relationship on their part (or mine). Even if it did, I do not care about their piece of gravel. My bank is not my friend. It's a mistake to assume the customer *wants* xyz brand to speak to them directly.

A business bank might do well to run a series of corp. blogs on local economies and sectors. Building up the public profile of seniorish managers through their writing & ideals is a PR model investment banks have been pursuing successfully for years.

Off-topic, but perhaps more worrying for traditional banks
http://equityprivate.typepad.com/ep/2008/04/the-five-circle.html

[Rob]

You know, at first I thought James was a bit mad. Not do social media/networking/banking? But the more you look at it, the more it seems we need to focus on what WE do for customers, not what they do for each other. We are not their friends, colleagues, or even their favourite brand. We're a service provider, looking for a relationship that for the majority of the time isnt there. Lets get our house in order before we stick our nose into the private lives (as private as can be in the online world).

My comments here on the subject - http://www.thebankchannel.com/2008/12/banks-should-be-bit-players-in-social.html

[Chris Skinner]

For those who haven't noticed, I've expanded in a lot more depth where my thoughts were during this week, and am now on Part 3 of a response to this debate. All commentary welcome.

[Marc O]

Isn't one of the premises behind social technology that it empowers and encourages word-of-mouth communication?

I think this is incredibly powerful for banks as their own customers have some of the most relevant information about how products and services are actually working for them. This fills a critical gap for retail banks, especially now, as it taps into the single most-trusted source, which is other people. I don't trust the brochure, I may not necessarily trust the banker, but I sure do trust people "like me" who use the products. That transparency really seems to build confidence. I even notice it in my own life, I talk to friends, colleagues, or relatives whose opinion I value. The idea with social is it opens up the communication channel so that I can see lots of other peoples thoughts and opinions from which I can choose which are interesting or applicable to me. Financial products tend to be personal - I don't go comparing current account balances with my friends every week - but they are also products where confidence is often instilled by experience, either personal or through others.

We all know the relationship between a consumer and the bank is a business relationship, not one for fun or social entertainment. I think it is interesting that some banks are including content like ratings and reviews and user submitted testimonials on their sites with content specifically submitted by users - for other users.

https://www.bankofamerica.com/reviews/

Has anyone else looked at having user-generated content directly within the bank brand?

[Kevin McIntosh]

Right now 36% of consumers don't trust banks according to the Edelman Trust Barometer in Jan 09. Banking is about relationships built on trust (at least community banking is); Social media is about building relationships. It doesn't have to start on facebook or YouTube. It can start online let's say at where a bank's current customers are-the banks online banking site (w/a link to the bank's blog); good information there with the tools to spread it around on Facebook / LinkedIn / Myspace can then create word of mouth from the bank's customers.

That's just the start. It's really not that complicated, depending on the audience segment you're targeting.

[mietwagen]

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