Social media creates unique risks for the financial services industry, and experts advise caution to avoid pitfalls.
Jacob Jegher, senior analyst with the research firm Celent, says fraud is a principal concern. "Anybody can go on Twitter and say, 'I'm from Wells Fargo; contact me,'" he says. "They can even stick the bank's logo in there and make it look official." An unsuspecting customer might tweet, "I'm having a problem with my account," and the imposter posing as a bank employee might elicit the account number and password.
Twitter is helping combat fraud by certifying the official accounts that banks set up, so consumers know that they are actually dealing with a representative they can trust. Citibank and SunTrust are among those that have already received the designation.
As assistant vice president and marketing director at Franklin Savings Bank in Farmington, Maine, Anna Lyon monitors other banks' Facebook pages and is convinced they are of little value. It is more efficient for customers to go directly to a bank's website, where more information is available, than to communicate through social media. "On a lot of bank sites I've looked at, people put their date of birth, where they went to high school and college, where they work, their spouse's name," she says. "Someone can just call up and say, 'I'm from your bank' and probably bluff them into giving [account] information."
Besides the potential for fraud, social media presents compliance risks, says Karen Garrett, a partner in the law firm Stinson Morrison Hecker who focuses on financial regulations. The mistake many banks make is turning over social media to the marketing or information technology departments."The problem with doing that is that those people don't know the full panoply of potential risks," she says. "Unless employees are clearly trained in what they may or may not do on social media, it's very likely they will end up creating a problem for the bank."
Even seemingly innocuous statements can violate banking regulations. Using social media to plug a nondeposit investment product can be problematic. Merely mentioning a no-fee card introducesa list of obligations. "The solution is not to go there at all—not to say the things that are going to trigger disclosures," Garrett says.
Employees also must understand that the bank's liability extends to personal statements made on sites such as Facebook or Twitter. As Garrett points out, "If a bank employee goes on a social media site and says, 'A hot little girl started work in my office today,' that can create an employment claim."
So far the majority of banks have stayed away from social media. Christophe Langlois, the founder and chief executive of visible-banking.com, a London consulting firm that tracks social media use in the finance industry worldwide, counts more than 2,100 initiatives in 60 countries, including blogs, Facebook pages, Twitter accounts and YouTube channels.
Roughly half of the social media initiatives are from U.S. companies; Twitter is the most popular venue among them, with 660 accounts.
Franklin Savings' Lyon contends that the notion banks must expand into social media is premature. "No one wants to be a dinosaur," she says, "but in banking we see a lot of trends, and a lot of them fall by the wayside." Her own experience indicates what she suspected intuitively: Customers don't care. When Franklin Savings took down its Facebook page, erring on the side of caution, Lyon says nobody noticed—"not even the people who had signed on as fans."
