The new world of social media has shown community bankers that exchanging information can make powerful allies out of one's rivals.
A host of providers are offering small banks and credit unions a way to share knowledge on topics ranging from compliance to best practices — areas where information does not necessarily create a competitive advantage.
"Our need for information is greater because we are a smaller bank," said Jenn McGlynn, vice president for information technology and project manager at the $288 million-asset Mariner's Bank in Edgewater, N.J. "Bigger banks have more resources."
McGlynn has made use of cbanc Network Inc. of Austin, Texas, which launched two years ago in January. Cbanc, which functions like a cross between Craigslist and a members-only question-and-answer forum, has grown substantially since its launch. It offers community banks a forum to ask questions on topics like technology, online banking, compliance and back-office and retail operations, among other things.
It also lets bankers exchange intellectual property in the form of white papers and documents on similar topics, using points amassed by "selling" their own papers to "buy" those of others. The site also ranks vendors, which can post to the forums but cannot see which banks are participating. This one-way mirror setup is meant to make banks comfortable about discussing their experiences with vendors honestly.
Cbanc has 703 community bank and credit union members. In the past six months the number of documents on the site has jumped 250%, to 700, and membership has more than doubled. Cbanc eliminated its $500 membership fee in November. Members can immediately earn points by signing up, answering questions and rating vendors.
"Once [community bankers] see peers being researched and sharing their [intellectual work], they think they have something good too, and there is a psychological shift on how tightly to hold on to their own work," said Myers Dupuy, cbanc's president.
McGlynn and Mariner's have been using cbanc since May 2010 to help the bank respond to questions raised in audits by the Federal Deposit Insurance Corp.
"Many [of our] departments have used cbanc to get policy and procedures in place that we did not have, or had to update, or make more detailed," McGlynn said.
McGlynn has also garnered thousands of points in the online marketplace by selling a comprehensive branch opening guide she created. Since joining Mariner's in 2007, McGlynn has overseen the opening of three branches, doubling Mariner's network, and she has become an expert in the process. McGlynn has sold the document 50 times for 700 points per transaction. She has about 16,000 points on the network.
"You are saving time," McGlynn said, regarding information she and her colleagues found in response to the audits. "If I did not have something like this to look at, I would have to read over the [Federal Financial Institutions Examination Council's] manual for what I missed, so it would be more time and research to put into this."
There are other models for such networks, and some industry observers said having a tight topic focus is the key to attracting an audience.
"What tends to characterize successful communities are a common thread of interest," said Ron Shevlin, a senior analyst at Aite Group LLC.
For example, Community Control, the social network of software-as-a-service company Continuity Control in New Haven, Conn., is known to have a particular expertise in IT and compliance because of its affiliation with Continuity, which provides compliance and risk analysis services for financial institutions.
Though its social network also broaches a wide range of banking topics, about 1,900 small banks and credit unions participate to trade information, such as written policies on IT, compliance and risk management. A crucial difference from cbanc is that participants do not have to pay with points for material.
"Our service is free," said Sonya Mills, director of marketing for Continuity. "We have free banking policies that we've offered since the beginning, and bankers can donate polices as well as use them."
The continuous loop between the software company and the compliance focus of the site is what makes it work, Shevlin said.
"Fundamentally, [Continuity Control] is a software technology vendor providing tools in the compliance and the regulatory area, but they have created a community," Shevlin said.
Pam Carl, the compliance officer for the $140 million-asset Lake Community Bank in Long Lake, Minn., belongs to cbanc and Community Control as well as the forum Bankers Online. She said she prefers cbanc because "the quality of what I am finding on cbanc is substantially greater … it is a collaborative network and others on it have a desire for good, quality materials."
Carl said she also likes cbanc's marketplace concept for selling intellectual work for points, because it places a value on the work.
Carl offered a SAFE Banking Act procedures and policy statement around the time the regulations went into effect in October, and her timing was good — she said she "sold" the document 50 times to other banks, for about 750 points for each transaction.
The regulations "caught a lot of bankers off guard," she said. "A lot of banks have downloaded this and implemented this, and this has become their own internal procedure to meet compliance of the regulations."
Carl has used part of her 20,000 points to download a risk assessment policy for mobile banking.
"We made a few minor changes and were able to get this rolled out," she said. "Our board loved it, and the FDIC examined it and they didn't seem to mind it." To produce her own document from scratch would have taken her about eight to 12 hours, Carl said.
Stessa Cohen, research director of banking industry advisory services at Gartner Inc., said such collaborative models are increasingly in vogue inside banks and outside, and particularly useful to smaller banks and credit unions because they are already organized into networks and associations that work with vendors and suppliers.
"This group is really aware of their own limitations," Cohen said. "Larger banks have larger resources."
Still, much larger banks have also created similar projects, Cohen said. Scotiabank Group, for example, has created a network of roughly 5,600 employees who participate in an internal forum to share knowledge, according to a May 2010 case study that Cohen produced for Gartner. Scotiabank has created 400 communities on its network and produced 3,300 documents, which help employees communicate across silos and engage workgroups as well as preserve critical institutional knowledge, the report said.
Using social networks internally and externally "will force more transparency" inside and outside the banks, but marketing through them, as many either plan to do or do already, will remain tricky, Cohen said.
Continuity Control, for example, said it is aware of the cross-sell opportunity it has between its own products and the bankers who show up for its forum. "Because the discussion area is on the same platform as our applications, members are able to see our store and the applications we offer," Mills said.
"We don't overburden our community members with applications, but there is that cross-sell opportunity," Mills said.
Similarly, cbanc ultimately plans to sell advertisements and do lead generation for vendors. "Banks are coming into cbanc to do due diligence on their vendors," said Dupuy, who stressed that the site maintains a strict firewall between vendors and the banks on the site. Banks can see the vendors, but not vice versa.
"We have specifically withheld the vendors when they have sought us out," Dupuy said.
James Van Dyke, the president and founder of Javelin Strategy and Research, said a social network with a strong vendor component will serve community banks well.
"Community banks certainly lack leverage with the technology vendors, and cbanc is in a strong position to pool resources and get more from providers on their clients' behalf," he said.
Carl said that arrangement should help her select vendors for the bank's online and mobile banking platform. Through cbanc, "we will contact folks who have vetted vendors and we will see if we can get more specific information," she said.
