Banks’ Social Media Challenges

I had the chance to participate on a SMB Boston panel last week on Driving Business Value Through Social within Financial and Regulated Environments, which I think was just a fancy way of saying “social media in financial services.”

The main message of my presentation:

Financial institutions should integrate social media approaches into their marketing and customer service processes.

As I see it, banks (and credit unions) are wrestling with — or perhaps, simply failing to address — challenges regarding social media. And you don’t even need to be a journalist to know where these challenges came from:

  1. What: Banks don’t know what to say in social media.
  2. When: Banks don’t know when to say it.
  3. How: Banks don’t know how to say it.

There are, of course, a couple of other potential challenges, but I think that “Who to say it to” is less of a challenge, and that “Why they’re saying it” is better understood. Regarding “why”, the research that Aite Group has done on social media in banking, bears this out: Most FIs are fairly clear that engaging customers, building brand awareness, and building brand affinity are why they’re involved with social media.

Engagement may be the objective, but I’m not sure, based on what I’ve seen FIs tweet and post, that they know how to achieve that objective.

I saw one FI recently tweet:

Have a new business that needs to grow quickly? Add credit card processing to increase revenues and cash flow. #smallbiz

Here’s another from a credit union:

We are listening. We are not like the BIG Banks. Check us out!

Do people really turn to Twitter or Facebook to see shameless marketing messages, re-purposed from other marketing channels? Are these tweets effectively engaging customers/members/prospects? I don’t know. But I bet the FIs that tweeted those messages don’t know either.

Another thing that struck me reading those tweets, was thinking about why the FIs chose to tweet those messages when they did. Was some marketing person sitting around with nothing to do, and suddenly realize that ts was 30 minutes since the last tweet, so s/he might as well tweet something else? Did something trigger the need for a credit card processing tweet at that particular time? I can tell you this: The credit union’s tweet came 11 days after Bank Transfer Day, so I doubt there was some pressing need to send out that tweet when it was sent.

The tone of these tweets doesn’t sit well with me, either. How many times have you heard the phrase “join the conversation?” Look again at those tweets above — do you know anybody who talks like that in the course of a normal conversation? (If you do, I bet you don’t engage in too many conversations with that person).

This gets at a big issue that marketers (not just in financial services) have to face: They don’t know how to have (or start) a conversation with consumers. Here’s the problem:

Marketing has, to date, been driven by the need and desire to persuade consumers.

But “engagement” isn’t accomplished through persuasion. (Well, persuasion can be a part of it, but it can’t be the only part of it).


So what should FIs do to address these challenges? There’s a tactical response and a strategic response.

The tactical response: Categorize and test.

A couple of months ago, Michael Pace from Constant Contact wrote an interesting blog post, advocating that Twitter users should periodically do a self-analysis of their tweets. Honestly, I thought that was a pretty self-indulgent thing for an individual to do. But at the company level, the idea has a lot of merit.

A high-level analysis of your company’s Twitter stream can help you understand how well you’re balancing various types of tweets. And the same could be done with Facebook posts. The challenge, of course, is understanding what impact those messages are having, and if shaking up the mix would improve the impact (i.e., engagement).


But even if you do this, I doubt that you’ll make more than just a minor impact on your firm’s bottom line. To have a more meaningful impact, you need the strategic response:  Integrate social media approaches into marketing and customer service processes.

In my presentation at the breakfast, I highlighted three ways to do this:

1. Influence preferences. I like what America First Credit Union does on its site (as does @itsjustbrent,  since he either borrowed this example from me, or I stole it from him). The CU incorporates members’ product reviews on the product pages. By doing this, the CU accomplishes:

  • Customer advocacy. Not just in the net promoter sense of the word — but in the more important sense of the word: Doing what’s right for the customer and not just your own bottom line. Helping consumers make better choices — that are right for them — by enabling them to access other customers’ opinions is a demonstration of customer advocacy.
  • Active engagement. I guess that, if a customer follows you on Twitter and reads your tweets, or likes you on Facebook in order to enter a contest to win a prize, you could call that engagement. But I would call it passive engagement. Customers who take the time to post a review are more actively engaged, in my book.
  • Continuous market research. I doubt many firms could capture the richness of information America First is capturing through satisfaction or net promoter surveys. And I know that they can’t capture it in as timely a basis as America First does.

2. Provide collaborative support. I’ve been holding up as an example of a firm with collaborative support, but it recently discontinued its Mint Answers page. No worries, Summit Credit Union is doing the same thing, and hopefully, they can become my poster child for this. Collaborative support is giving customers the opportunity to answer other customers’ questions. Dell has been doing it for years. Why provide collaborative support?

  • Reduced call volume. I’m not going to say that you’re going to see a huge volume of deflected calls, but over time, if you market the collaborative capability, it can help.
  • Expanded knowledge base. This is where the bigger value comes in. Customer service reps leverage internal knowledge bases to answer customer questions. Collaborative support helps grow that knowledge base, and helps figure out which answers and responses are more valuable than others. This expanded knowledge base will also prove valuable in training new employees.
  • Active engagement. Similar to the product reviews, customers who participate in collaborative support sites are demonstrating active engagement.

3. Instill financial discipline. This is about using social concepts to get people to change the way they manage their financial lives. Take a look at the research that Peter Tufano has done regarding what motivates people to save.  There are some good examples of this in practice — see Members Credit Union’s What Are You Saving For?. I recently chatted with the CEO of Bobber Interactive, and like what they’re doing about bringing social gamification to how people manage their finances.


Bottom line: Your firm can putz around with Facebook and Twitter until you’re blue in the face. For financial institutions, this is probably not going to have much of an immediate impact on the bottom line. It will likely take years of experimentation to figure out what to say, when to say it, and how to say it on social media channels.

If you want to engage customers, you have to give them a reason to engage. Mindless, idle chatter on Twitter and Facebook isn’t sustainable.

The path to making social media an important contributor to bottom line improvement — and sooner rather than later — will come from integration social media concepts and approaches into everyday marketing and customer service processes.


Boozos On Banking

Let me be direct and get straight to the point: This blog post is about the absolutely worst presentation about the changing world of banking that I have ever seen.

And I’ve seen (and possibly created) some real losers.

Booz & Co. (a very reputable consulting firm) published a PDF called Next Generation Retail Banking: The Rise of Social Apponomics. Some of the lowlights from this deck include claims regarding:

  • The end of all things. According to the authors, as a result of the financial crisis, corporate cultures have been torn apart, and good and evil have been blurred. The report states that “Arisen from chaos have new views of the world, beliefs, and behaviors that pose significant new challenges to banks.”
  • Digitization of human culture, the key to growth and profitability. The authors believe that a “fundamental paradigm change towards offering a holistic customer experience is required, implying transforming a bank from its core to its periphery.”
  • Customized banking through coordinated networks. To quote the report: “The result of the digital transformation are coordinated banking networks organized by concentrators that work to offer the individually most relevant experience and solutions that maximize value-to-customer across the entire lifecycle.”

And that’s just slide 1.

The second slide attempts to elaborate on the “required paradigm change” and discusses something referred to as “nevolution” — broaden one’s horizon, creating options, preparing for change.

The third slide informs us that the Internet changes everything, and in case we didn’t quite understand that, goes on to mention that Broadband changes everything. And for good measure, the final bullet on the slide lets us know that Mobile changes everything. A little clip picture on the slide contains the label: “Customer expectations are evolving.”

Slide 4 is a word tag chart.

The fifth slide talks about how the “key capabilities” in retail banking  have evolved from technology (the past) to value (the present), and how they will evolve to engagement (emerging).

There are a couple more slides, and if you have a strong constitution and high tolerance for pain, you can read them for yourself.

My take: I’m serious about this: Booz should remove the deck from its website, apologize for publishing crap, and call a do-over.

In addition to being just a bunch of buzzword bingo, what’s really mind-boggingly annoying here is that Booz is trying to create some new term to describe the new environment (social apponomics), but no where — I repeat, NO WHERE — in the deck is there any definition or even further mention of the term past the title slide.

Really, Booz?

[h/t to The Financial Brand for alerting me to this one. Although, maybe I shouldn’t be thanking him :)]

Updated Bank Names For 2009

About this time last year, I published a list of updated bank slogans for 2008. This year, I’m moving up to the big time and renaming banks altogether. Here’s a partial list of new bank names we need to see:


Old Name                   New Name

NetBank                      NotABank

WaMu                          VaMoose

PFF Bank                     Poof! Bank 

Integrity Bank             DisIntegrated Bank

Hume Bank                 ExHume Bank

Security Pacific Bank   In The Pacific Bank

IndyMac Bank             InDeGround Bank

Downey S&L               Downed S&L

ANB Financial              A Necrophiliac’s Brothel Financial


By the way, if you wondering what these banks have in common, go here.

And if you need help understanding the name of the last bank, go here.

Banks Are In The Bush League

Who’s got a higher confidence rating, banks or George Bush?

The good news for banks is that the answer is banks. The bad news for banks is that it’s close.

According to the November Rasmussen poll, 35% of the people polled at least somewhat approve of the way the President has handled his job. That’s actually up 2 points from the October survey.

On the other hand, a new study released by market researcher Morpace found that just 38% of consumers are very confident in the banking industry. And that’s down six percentage points from the firm’s September survey

Given the events that unfolded in the past two months, that’s hardly a surprising finding. But what is noteworthy, though, is the decline in consumers’ confidence with their personal banks. According to the article in Marketing Daily:

“Banks have been rolling out messages of reassurance to current and potential customer alike. According to Morpace’s VP of Customer Loyalty Tom Hartley, ‘What the banks [have been] doing is communicating with customer more, through email, ads and other sources, doesn’t seem to be working in restoring their confidence.”

My take: I agree with Tom 100%.

Plenty of smaller institutions — community banks and credit unions in particular — have seen a nice influx of deposits over the past eight or ten weeks. Why? Because of their “safe and sound” messages? No. Because consumers are spreading out their deposits across institutions.

And quite frankly, I don’t think anyone believes any financial institution that touts how secure it is. Not when the CEO of one acquired firm goes on TV talking up his bank’s “bright future.” Or when another bank runs full page ads in major newspapers telling us how safe it is, only for us to find out more recently that is, well, not so financially secure.

So what should banks do?

1) Ignore the industry surveys. The economy is in the tanks, and FIs seem to be failing left and right. Of course the confidence rating of the industry as a whole is going to fall. Big deal. Your bank’s score is what matters — not the industry’s.

2) Stop trying to advertise your way to a higher confidence rating. Banks will build back their confidence ratings as new and existing customers experience a higher level of service. You cannot advertise your way to greatness.

3) Develop (or re-develop) an onboarding program. As new customers come on board, the key to their long term retention will be made or broken in the next 6 to 12 months. It’s critical for banks to recognize the types of relationships these new customers want to have with them. Are they simply spreading their funds across banks for security or are they abandoning old banks and looking for a new primary bank to have a relationship with? Quit wasting money on newspaper and TV ads, and put it into some marketing analytics efforts to figure out how to grow the relationship with the influx of customers who are coming in the door (thanks to no effort on your part).

4) Stay away from TARP money. (Are you listening credit unions?) I don’t know how, and I don’t know when, but at some point taking TARP money is going to create PR problems for the institutions that took those funds. 

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Top 20 Songs On Wall Street For 2008

Swillboard pre-announced its top 20 songs on Wall Street for 2008. I got a sneak preview, so here they are:

20. Grateful Dead, “Loser”
19. Aerosmith, “Dream On”
18. Allman Brothers Band, “Whipping Post”
17. Beatles, “Help!”
16. Animals, “We Gotta Get Out Of This Place”
15. Bee Gees, “Stayin’ Alive”
14. Patsy Cline, “I Fall To Pieces”
13. Country Joe and The Fish, “The I-Feel-Like-I’m-Fixin’-To-Die Rag”
12. Dixie Hummingbirds, “I’ll Live Again”
11. The Doors, “The End”
10. Bob Dylan, “The Times They Are a-Changin'”
9. Guitar Slim, “The Things That I Used To Do”
8. Jane’s Addiction, “Been Caught Stealin'”
7. Led Zeppelin, “Dazed and Confused”
6. Barry McGuire, “Eve of Destruction”
5. Joni Mitchell, “Help Me (I Think I’m Falling)”
4. The Surfaris, “Wipe Out”
3. Marion Williams, “Packing Up”
2. The Smiths, “Heaven Knows I’m Miserable Now”

And the number one song on Wall Street for 2008:

1. The Temptations, “Ain’t Too Proud to Beg”

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Three Things Banks Need To Do To Improve Their Reputation With Consumers

While there are a lot of things that banks need to do to get back on track profitability-wise, there are three “things” banks need to improve in order to (re-?)gain their credibility with consumers:

  • Transparency. If the CEO of your company goes on TV (say, Jim Cramer’s show) and tells the world the future of your firm looks bright, and then two days later, other banks are picking at you like vultures on roadkill, then your firm is not transparent. Consumers (not to mention investors) are sick and tired of this crap. Come clean about your financial situation. And come clean about your product quality. And your fees. Be transparent. We know the difference.
  • Tangibility. The Financial Brand blog recently highlighted the branding efforts of one bank, who’s running a series of ads showing someone (as Jeffry Pilcher writes) “wrestling — literally — with some aspect of their financial life: a wallet, purse, or checkbook. The only blurb of copy — the headline — says ‘Take control of your finances.” Pardon my french, but what the hell does that mean? Exactly what, Mr. or Ms. Banker, are you proposing to DO to actually help us “take control”? Aspirational messages are nice, but at some point (uh, sooner rather than later), banks need to be a lot more tangible about delivering on this stuff.
  • Competency. Pretty soon, I’m going to get a call from my account manager at my bank, asking me to talk with an adviser from the investment firm that they recently acquired. (This could be any number of banks). My response is going to be “you want me to talk to an adviser from a firm that did such a *great* job managing its own money that it nearly went out of business before you guys scooped them up for 10% of the value they were worth a year earlier?” (This could be any number of investment firms). A bank branch rep I spoke to recently couldn’t even answer basic questions about the changes in FDIC coverage. My point: To improve their reputations, banks (and other FIs) are going to have to re-prove their basic competency regarding financial matters.

The reason I refer to these things as “things” is that I don’t know what else to call them. Measures? Perceptions?

Problem is, I don’t think any bank tracks these “things” today, so how will they really know if they’re improving on them?

Maybe the brand index methodologies out there will tell them. Not likely.

Fixing these “things” isn’t going to come from external measurement. It will happen because the management team will take control of the situation, make fixing their reputation a priority, and do something about it.

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Discrimination In P2P Lending?

A couple of economics professors have published a fascinating report, that raises a lot of questions about P2P lending.

The authors analyzed all loan applications listed during a one-year period on They found that listings submitted with a picture of a African-American person — or no picture at all — were significantly less likely to get funded than listings from whites with similar financial information. If funded, African-Americans were subject to a slightly higher rate.

They also discovered some discrimination against older borrowers, overweight borrowers, and borrowers that they considered to be unattractive. They did find, however, that lenders discriminated in favor of members of the military and women (especially single women).

What complicates this picture, though, is that the site’s black borrowers were more likely to default (by 36%) than the white borrowers with similar financial information. In addition, members of the military were 49% more likely than non-military borrowers to default.

My take: I’ve commented before on what I consider to be the disingenuous marketing of P2P lending sites. Prosper’s claim that it was “created to make consumer lending more financially and socially rewarding for everyone” isn’t exactly supported by the professors’ findings.

Beyond this, though, the study raises legal issues (I think — I might be wrong here. I’m not sure what the legal requirements are regarding Prosper and other P2P sites). Banks are prevented from redlining — should P2P lenders be prohibited from discriminating, as well? And if there truly is discrimination happening, what is (or should be)’s role in identifying it or preventing it?

Seems to me that Prosper (and possibly other P2P lending sites) runs the risk of becoming just a way for the affluent to lend to the affluent. According to the study, while borrowers with a credit grade of at least 640 accounted for just 17% all listings, they comprised 46% of all funded listings. Is this really all that different from traditional banks?

I remain somewhat skeptical that P2P sites are going to make a big dent in the banks’ lending businesses, and even more skeptical of the sites’ claims to be providing a social service.

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Why The iPhone Isn’t Going To Revolutionize Banking

In banking, it seems that every time a technology development comes along, the prevailing mentality is: “We need to be on the forefront of this new development, and lead the way instead of follow.”

The “we” in that sentence, of course, is the bank that that person works at. Rarely (if ever) do you hear, “Let;s wait and see what impact this development has, and it’s rate of adoption — after all, we still have issues deploying the last generation of technology.”

And so it’s hardly surprising that with the release of the new version of the iPhone, comes the claims that the iPhone will revolutionize banking. (Sidenote: Is there anybody on Twitter that isn’t an iPhonatic?)

My take: The iPhone isn’t going to revolutionize banking.

Why not? For one simple reason: More convenient access to getting account information and conducting account transactions is evolutionary, not revolutionary.

The industry has seen one form of account access improvement after another — ATMs, phone banking, home banking, online banking, mobile banking — and not one of them has produced a revolution. Sure, new players like ING Direct have upset the apple cart, but they did so through product (or perhaps more accurately, pricing) innovation (i.e., online high yield savings accounts).

Real revolution in banking isn’t going to come from technology devices. Revolution will come from business model innovation. While I don’t believe that P2P lending or auctions are going to produce that revolution, these models are at least more in line with what will cause (yes, Colin) disruptive changes.

While you might argue that these new models are fueled by technology developments, remember this: Technology enables change — it doesn’t cause it. For any technology development to be an enabler of change, however, it takes either new industry entrants to make some big bets to cause change, or existing firms to make some radical changes to their existing way of business.

Will the iPhone be at the center of either of those scenarios? No way.

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Bank Satisfaction: Up Or Down?

American Banker reported on JD Power’s 2008 Retail Banking Satisfaction Study, which surveyed more than 19,000 people in January of this year. According to the article:

“Rising fees and poor complaint resolution were people’s chief gripes in a retail banking customer satisfaction survey that gave the industry poorer grades than a year ago.”

Sounds reasonable.

But what the article failed to mention was that in February, American Banker reported on the latest American Customer Satisfaction Index study which found that, in a survey of 18,000 consumers, satisfaction with banks was higher than the previous year.

So, is satisfaction with banks up or down?

My take: It’s hard to believe that consumer satisfaction with banks is up. The impact of the credit crisis, rising fees, and tough economic conditions overall have been building for a while now. The Consumer Confidence Index has steadily declined for at least a year now. It’s hard to believe that any consumer-focused industry would be experiencing increasing satisfaction in this environment.

Debating if overall satisfaction is up or down, though, obscures some more important questions:

1) What’s Wachovia doing right? As banks’ index dropped 3.5%, Wachovia’s score increased by about the same percentage. In the ACSI study, banks as a group scored 78. Excluding the five largest banks — of which Wachovia is one — the score was 80. Wachovia’s performance flies in the face of other firms’ declining scores, and is in sharp contrast to the other large banks which dragged the industry down.

2) What’s up with credit unions? According to the American Banker article, the JD Power study included credit unions, which “accounted for 9 points of the drop in this year’s overall score.” That’s very counterintuitive, and seems to contradict plenty of press releases from CUs themselves touting their astronomically high member satisfaction rates.

3) Is satisfaction the right thing to measure?
Trust me, the last thing I want to do is give the Net Promoter Syndrome sufferers an opening here, but we’ve got to face the facts: If two large-scale studies that purport to measure “customer satisfaction” with banks can produce directionally-different results, maybe there’s something wrong with the measure that’s being used.

Bottom line: While you can’t blame the firms whose satisfaction scores increased for tooting their horns, I do hope that behind closed doors that the banks are giving a bit more scrutiny to the JD Power and ACSI findings, and doing what any good marketing analyst would do: Trying to accurately attribute the change in results — whether negative or positive — to the factors that influenced those changes, whether they be internal effects (like improved or diminished service levels) or external factors (like economic conditions).

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The Good News/Bad News About Consumer Trust In Banks

The good news for banks: According to a Gallup survey, only two industries — drug stores/pharmacies and supermarkets — garnered a higher percentage of consumers who said they had a “great deal of trust” in the firms that they regularly deal with in an industry.

The bad news for banks:
Barely one in five respondents said they had a great deal of trust in their financial institutions.

My take: What does it really mean when consumers say that they trust — or don’t trust — their bank or financial institution? Regarding the 21% of consumers who said they had a great deal of trust in their FIs: What exactly were they referring to?

Is is trust that their deposits will be there when they want to withdraw them? Is it trust that when they make a deposit that the correct amount will be credited to their account? Do they trust that that when their banks send them a statement that the amount on the statement is correct?

Is it trust that when the FI makes a product recommendation, that it’s right for that customer? Or is it trust that when their bank claims to have the best rates in town, the claim is true?

The article in American Banker that I pulled this data point from was titled “Can Banks Maintain Edge in Confidence Game?

There are two things wrong with this title:

  • The term “confidence game” is often shortened to “con game.” Somehow, I don’t think that’s what the author was alluding to (or, at least, I sure hope it wasn’t).
  • Banks (and FIs in general) have no “edge” in consumer trust.

Yes, banks were ranked third when looking at the top-box score. Interestingly, the article doesn’t report that stats for the rest of the scale.

But regardless of what the scores for the other scales were, this fact remains: 79% of respondents did not say that they a “great deal of trust” in their FIs. And the last time I looked, 79% qualified as “vast majority.”

Bottom line: Being ranked third on the top-box scale of Gallup’s trust survey is nothing to brag about. Consumers, in general, have little trust in the firms they do business with across a wide range of industries. And in tough economic conditions — especially those marked by crises like the credit crunch — trust scores are going to decline despite what firms do or don’t do.

One consultant was quoted in the article as saying “if banks persist in becoming even more aggressive in overdraft and nuisance fees, they will be putting their trusted positions at risk to a greater degree than the mortgage phenomenon.”

He was right on one point: That the fee issue is more important than the mortgage impact.

But he was wrong on another: It was the aggressive push for OD and nuisance fee income that helped to erode trust in the first place. You can’t “put your trusted position at risk” if you aren’t trusted already.

It’s too bad that the Net Promoter Syndrome sufferers spend so much time knocking satisfaction surveys for their fuzzy definition of satisfaction. Trust is an even more vague term, and arguably more important — especially in an industry like financial services — than either “satisfaction” or “likelihood to refer.”

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