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Exclusive Survey: Compliance concerns slow new-media rollouts by banks (May 11, 2009) E-mail

Even the 16% of the industry that has launched into new media and social media are moving cautiously

By Steve Cocheo, executive editor, This e-mail address is being protected from spam bots, you need JavaScript enabled to view it

[This article was posted on May 11, 2009 on the website of ABA Banking Journal, www.ababj.com, and is copyright 2009 by the American Bankers Association.]

Facebook, Linkedin, and Twitter lead bankers’ choices of new media and social media mechanisms for reaching out in new ways to customers and prospects, and 30-somethings are their target demographic of choice, according to an ABA Banking Journal electronic poll.
 
Overall, bankers responding to the poll painted a picture of an industry that is still “toe-dipping” into new marketing techniques. Of the 126 institutions responding from across the spectrum of bank asset sizes, 62% are not yet using new media or social media for marketing and have no immediate plans to start. The survey indicates that 16% of banks are active, and that another 22% expect to move into these marketing techniques in 2009. (Exhibit 1)
 
The survey also indicated that, among banks actively using these media, the most significant impact won’t be seen at least until next year, by their own projection. (Exhibit 5)
 
As a general rule, “new media” in this article refers to one-way communications tools such as podcasts—audio and video presentations posted on websites; whereas “social media” refers to two-way online communities such as Facebook and Twitter.
 
(The May print edition of ABA Banking Journal features case studies of four community banks that have ventured into new media and social media.)

Why bankers hesitate
When the likes of Facebook and Twitter are becoming so ubiquitous in our culture—comic strips are routinely referring to twittering and blogging, and entire business seminars are being devoted to Twitter—why aren’t more bankers wading into the new media stream?
 
The leading answer from the 58% of respondents who don’t use these techniques is fear of compliance violations.
 
(The potential risks of new media was covered in a March article by ABA BJ compliance contributing editor Nancy Derr-Castiglione. You can read the article, and post comments on the risks and your bank’s experiences, at http://tinyurl.com/NewMediaHell)
 
When you have only 140 characters for a Twitter message, it’s enough room to get into compliance trouble, but not much room to cover your compliance bases.
 
But that’s not all. As Exhibit 2 shows, nearly half of the bankers not using new/social media simply admit that they don’t quite “get it,” and 37% feel that these techniques aren’t a good fit for their customers.
 
One in ten of the bankers don’t think these new methods work, and nearly two out of ten think “tweeting” and such takes up too much time.

Among the “believers”
Among the 16% of the responding banks that are active, the top three methods reported—Facebook, Linkedin, and Twitter—all represent free, or inexpensive means that are maintained by outside organizations. Used somewhat less, as shown in Exhibit 1’s bar chart, are home-grown efforts, such as social media or new media features built into a bank’s own website.
 
Interestingly, usage of podcasts and postings on YouTube were tied at 14%. MySpace came in at only 5%.
 
Exhibit 3, which reports the age groups that bankers indicated they wished to reach (they could choose multiple groups), indicates a surprising emphasis on older groups. Only 20% of the banks using these media indicated a wish to reach teens, for instance, in spite of the perception that new media and social media are “home” for them.
 
A majority of respondents (58%) reported using social and new media for both personal and business interests, while 21% don’t personally use any of these methods. (Exhibit 9)

More about compliance
The pioneers appear to share much of the compliance concern that the holdbacks have. As Exhibit 7 shows, nearly three-quarters of the banks that are active require new efforts to be vetted by Compliance prior to posting.
 
In her article, Derr-Castiglione includes a warning about “loose cannons” in the bank deciding to experiment on their own with new media and social media. This poses the risk that they will inadvertently run afoul of compliance rules and regulations. Reflecting such concerns, the banks that are active generally have tight policy on representing the bank on the web and otherwise in new media. Nearly half permit experimentation, but only by authorized staff, while 42% don’t permit any experimentation at all. Exhibit 6 also shows that at one out of ten banks, anyone can jump into the new media stream.
 
Another indication of compliance concern is seen in the four out of ten banks that avoid discussing specific products and services in their social media efforts (Exhibit 8). The less specific an effort is, the less likely a bank will put a foot wrong and run afoul of regulations.

Costs of venturing beyond old media
As indicated earlier, at this point direct costs don’t appear to be a significant factor in the decision to go with these new marketing methods. As Exhibit 10 shows, more than half of the banks already using them say that costs are negligible. Less than 20% even report spending more than $10,000 on their efforts, excluding costs of the own staff and of running the bank’s website.
 
One out of four banks that use these methods employ some form of outside assistance—consultant, marketing firm, or ad agency—to some degree. Another 20% are considering asking for help, while 55% don’t use outsiders and have no plans. (Exhibit 4)

About the sample
Across the entire survey base, here is the distribution by asset size: under $100 million, 14%; $101-$500 million, 37%; $501 million to $1 billion, 21%; $1.1 billion to $3 billion, 15%; $3-$10 billion, 6%; and over $10 billion, 7%.
 
Among those banks using social media or new media in some way, here is the distribution by asset size: under $100 million, 26%; $101-$500 million, 37%; $501 million to $1 billion, 16%; $1.1 billion to $3 billion, 11%; $3-$10 billion, 5%; and over $10 billion, 5%.
 
The survey was conducted using SurveyMonkey, in April 2009. The survey was publicized for data collection across the base of subscribers to ABA Banking Journal Report e-letter, a subset of the ABA Banking Journal subscriber base, which represents a cross section of the U.S. banking industry.

[This article was posted on May 11, 2009 on the website of ABA Banking Journal, www.ababj.com, and is copyright 2009 by the American Bankers Association.]
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Kevin McIntosh said:

Thanks for the great survey.

Here's my question I'd like to ask everyone.

Bank of America, Wells Fargo - both have been using Twitter - am I missing something or are they exempt from compliance? Personally, I think the issue is banks don't understand how to use social media. I think they're thinking in a product promotion mindset vs. information / brand reputation management mindset. What am I missing here? Thanks.
 
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May 19, 2009 | url
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Christine Durkin said:

Kevin, In the case of Bank of America, I believe their getting around any compliance issues on Twitter because they cleverly respond to client questions, concerns or complaints with a general reply "Sorry to hear that" and follow with the invitation to take the discussion to the DM option (for private interchange between bank rep and client). You are correct though, in a recent Bank Marketer survey, the majority of banks are not using SM because they're afraid of compliance issues.
 
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April 12, 2010
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