For Banks, There's More Tech Behind Tweets
As banks search for their place in the fast evolving world of social media, they are increasingly looking to technology to help them cope with a tangle of potential regulatory and legal challenges.
Social media communication, by its nature, tends to occur in real-time, which affords financial institutions no time to vet their Tweets and Facebook posts via the usual retinue of lawyers and media handlers.
Sensing opportunity, several tech firms have jumped into the market with what they claim are solutions to handling the compliance and regulatory challenges of dabbling in social media.
“Because financial services are so relationship- and referral-driven, social media is perfect,” says Clara Shih, co-founder of Hearsay Social Inc., of San Francisco. “But the financial services industry is also one of the most highly regulated.”
The Securities and Exchange Commission and the Financial Industry Regulatory Authority regulate the electronic communications of banks and other financial institutions. In January, FINRA issued specific guidance to broker-dealers and securities firms about tracking and archiving social media correspondence, as well as many other issues pertaining to social media interactions.
That affects many of the largest banks, which have securities trading arms. But it leaves communications from other departments, such as for marketing, on uncharted ground.
“Social media is rewriting the rules and [increasing the] speed with which banks have to respond,” says Mark Schwanhausser, a senior analyst for Javelin Strategy and Research.
Citigroup Inc. has been working extensively with at least three companies to support its social media strategy. They include CoTweet Inc., Hearsay Social and Socialware Inc.
Those partners “are totally focused on the financial services category and helping companies work through … regulatory issues so you can be out there and engaging in the appropriate way,” Robert O’Leary, Citi’s managing director of global advertising, told the Advertising Club in New York earlier this month.
Citi declined to make an executive available for this story. Frank Eliason, Citi’s senior vice president of social media, told American Banker in January that the bank uses CoTweet to manage workflow over Twitter. At that time, Citi had trained about 100 customer service representatives to track and respond on Twitter to customer queries and complaints.
Citi partner Hearsay Social works with more than a dozen financial services companies. It received $3 million in venture capital from Sequoia Capital of Menlo Park, Calif., in February. In addition to social media tracking and archiving, Hearsay Social helps banks manage workflow that might be initiated by customer service requests received through Facebook or Twitter. It also works on marketing campaigns.
Other banks have been less vocal about the technology they use. “We believe that we have a best-in-class solution for meeting our regulatory and compliance needs for social media communications,” a Bank of America Corp. spokesman said in an email.
The bank, which is based in Charlotte, N.C., declined to offer further details, though one prominent use of Twitter occurred in January when B of A used the microblogging service to respond to customers during a partial online banking outage.
Currently, banks devote less than 2% of their marketing budgets to social media, said Ron Shevlin, a senior analyst for Aite Group LLC of Boston, after reviewing a survey conducted in the fall of 2010.
“The real spending [by banks] on social media compliance is far from mature or widespread, but there is clearly a market for this,” Shevlin said.
Schwanhausser said that many banks would rather work with a vendor than develop technology in house because it is costly and time-consuming to do so. That is particularly the case given the undeveloped state of social media channels at most financial institutions and the uncertain payoff from making significant investments in developing their own technological solutions.
Smarsh Inc. went into business in 2001 archiving email and has since expanded its applications to include social media. The Portland, Ore. firm works with 13,000 mostly financial service companies archiving email. However, it enjoyed triple-digit growth in demand for its social media archiving and tracking product in the second quarter.
“We are seeing more interest in social media activity than we ever have before, and of all the products we have introduced since inception social media is growing at the fastest pace,” says Sam Kolbert-Hyle, Smarsh’s vice president of business development and strategy.
CoTweet, a division of ExactTarget Inc., an email and interactive marketing company in Indianapolis, said it is seeing more interest from the top banks, particularly around CoTag, a convention it developed for Twitter. CoTag enables bank representatives to personalize and authenticate their correspondence using an identifying tag at the end of their Tweets, while archiving and organizing them into a coherent workflow.
CoTweet works with two dozen financial institutions including Citi, Suntrust Banks Inc. and Wells Fargo & Co.
“[Banks] no longer have a choice [of whether] they will participate in social media,” said Jesse Engle, vice president of social media for ExactTarget. “The volume of people who want to engage with companies via social media is increasing, and their level of expectation is also increasing.”