Q&A on Social Media

Addressing risks, regulation and potential returns of social media

By Sarah Carter

Question: Why should I care about social media?

Answer: Social media offers banks a unique and powerful means to understand our customers at a much deeper level. This happens through content that they freely share and through engagement with target audience members that builds trust and deepens relationships on a more personal level than other forms of communications.

It’s important to note the word engagement. We don’t market to people on social, we engage with them. Social allows us to share experience, and that’s a powerful differentiator and tool.

Question: What’s the risk with social media?

Answer: Social media risk is usually segmented into four areas.

– Outbound risk: This occurs when users share things such as personally identifiable information, the next board meeting minutes or your company’s product roadmap. This risk tends not to be malicious, but rather in-advertent. Users forget where they are, what they’re doing and who might see the content.

– Risk coming inbound: We generally trust the people we’re connected to on social as they’re friends, business connections and so on. But that shouldn’t mean that we always trust their content. Increasingly, spoof attacks are tricking users into sharing content and revealing information.

– Regulatory and legislative challenges: Social is just another form of electronic communications and requires that the same rules be applied to it, as you do to other forms of communications   There are more than 10,000 U.S. laws and regulations that address electronic communications as well as some very specific guidelines for social—such as those recently issued by the Federal Financial Institutions Examination Council.

– User behavior:  How are users using social, is it appropriate to your business? Not understanding social media rules of engagement and compliance issues for your firm and industry can open a Pandora’s box of risk. Be sure you have a proper plan and training in place.

The biggest risk is that of not taking part in social. It is possible to use social effectively and safely, while meeting regulatory guidelines. It just takes some thought, planning and education. Staying out of this medium means you’re missing a huge opportunity to augment your business communications and further engage with clients and new prospects.

Question: What do the regulators say about social media?

Answer: The use of social media by financial institutions has become mainstream, and regulatory bodies are coming to grips with its use. Recently FINRA, which first issued guidelines for the securities industry in 2010, announced it will conduct social media “spot checks,” which further validates social as a mainstream communications channel. Most other regulators are following FINRA’s lead, and recommending similar guidelines to those issued in the regulatory notices 10-06 and 11-39.

Community banks should be very familiar with the FFIEC, which issued guidance on social media usage by banks, savings associations and credit unions that differ only from FINRA with the guidance to implement a measure of return on investment as part of a social strategy.

Question: What’s coming in the future for social media?

Answer: Social media and the banking industry were made for each other. According to the 2012 Ernst and Young Global Banking Survey, there has been a 7 percentage point increase from 2011 to 2012 in banking customer attrition, and 13 percent of Americans are now turning to social media to research new banking products, and creating a 12 percent increase in commenting and sharing their experiences on social media, an upward trend.

By understanding consumer habits, wants and lifestyles—which they increasingly share on social media—the banking sector is able to provide much more suitable products in a much more efficient manner. Social media will become more tied to business objectives, to measurable return and to the growth of the personal brand.

Forrester Research tells us that 15 percent of us trust a corporate brand, but 70 percent of us trust the individuals in our network, which means we’ll see banks start to use social media “poster children” as agents of change, and change for the better.


Sarah Carter is general manager, social business at Actiance Inc., a company in Belmont, Calif., that offers social media management software.