Social Networking for Banks: The Missing Link Will Stay Missing

There has been a lively debate on both sides of the Atlantic in recent days on the prospects of social networking for banks. Essentially, the discussion boils down to whether or not banks can or even should make use of the Facebooks, MySpaces, and Hi5s of the internet world.

It is a valuable debate and am pleased they are undertaking it. On one side is James Gardner, author of the Bankervision blog and “Head of Innovation and Research in a major UK bank.” Gardner is squarely against the idea:

If there was a business reason to be in social media, banks would flock there pretty quickly. It took 5 or so years for the flock to get there with Internet banking, and it will probably take as along for mobile. Social media has been around for more than 5 years, and I’m not seeing much flocking.

On the other side of the debate (and the Atlantic) is Colin Henderson of TheBankwatch blog, arguing that social networks offer the opportunity for bankers to perform the modern form of branch banking:

How do we pick branch locations? We pick them because there are office buildings, residential density, new growth areas etc. Branch managers join the chamber of commerce, and other local associations to meet people and chat with them. This is classic banking 101 and build confidence and trust.

Social media is understanding this new location called internet that is not just essential, but fundamental to Gen X/Y as well as a few older fogies.

Other valuable discussions on social networking and banking can be found here and here.

As someone who is manning this social network for bankers, I am encouraged by this debate. Just talking about the implications of social networking and banking is something that wouldn’t have happened in days past. Bankers would have dismissed such New Age-y technology as the domain of Steve Jobs and the like, not bankers.

But we are in a different era today, one in which ideas are considered openly, and social networking and banking is good idea indeed. Ideally, social networks are perfect vehicles for bankers, as my good friend Colin Henderson wrote. A “social networking” interaction is different from the type of social interaction James Gardner sees at Bankervision. In a social network, the minutia, that amazingly personal information of a user creates a greater bond than, say, these comments on blogs. A social-network interaction is based on much more knowledge. The last post in the Bankervision thread I commented on was by “Steve.” I have no idea who “Steve” is (I am sure you are a wonderful chap, whoever you are). But on our site, as many of you know, we can learn much more about any member and interact accordingly. That matters in the social dialogue. It makes for a deeper dialogue — one that could greater benefit bankers. Could you imagine if you really truly knew who your customers were and what they needed, not just what is their credit score today? I would hope such knowledge would generate much deeper dialogue than “our rate is 6.75% on a 30-year fixed.”

Ah, if only banking could embrace Facebook, et al! I am afraid this will not happen anytime soon, because we have all ignored a key component to any banking discussion: compliance. I cannot imagine how a Facebook “friendship” could be regulated today. Could one of the current banking monoliths truly “control” a Facebook “friendship”? I would suggest it could not, at least not for now. Much thought and processes will need to be developed before such a social networking project is embarked — particularly in today’s regulate-regulate-regulate, post-financial-crisis environment.

Colin is right: social networking fits banking. One day in the (too distant) future he’ll be proven right.

ADDITIONAL INFORMATION

Such tools like Power.com might facilitate the migration to social media. Power.com is a new site that allows users to manage multiple social network accounts from one location. Check it out here.

Click here for an interesting podcast on the topic.