Banks Jump on Twitter Wagon

CU360
June 5, 2009 | COMMENTS

Social networking is becoming an increasingly popular way for banks to reach consumers amid the economic downturn, reports USA Today.

Wells Fargo and Bank of America have begun to "tweet"—post messages of 140 characters or less on Twitter.com—with customers about everything from bank fees to product features. Discover Financial, American Express, and Citigroup have launched Facebook or MySpace pages. Other financial institutions have put marketing videos on YouTube.

Financial institutions are establishing a presence on social-networking sites to tap into a growing demographic and to control the conversation about their brands. But the economic turmoil, some say, makes it even more important to reach out to customers any way they can. One appeal of social networking is that it provides an almost instant communication with members or customers.

In general, banks and card issuers have been slower than other industries to embrace social networking. But social networking has become popular enough that, for many institutions, it's not a question of if but when to establish a presence on these sites, says James McGovern of the research firm Corporate Insight.

As a growing number of firms become proficient in the social-networking world, the norms of customer service are being upended. Increasingly, today's online interactions between banks and consumers are peppered with shorthand, typos, and even slang. "It sounds like you need 2 talk 2 someone abt your specific situation," read a recent Twitter post from a bank representative.

Adding to banks' challenges, social-networking sites are becoming another venue for consumers to complain—and complain they do as credit card rates and fees rise even as the economy struggles and unemployment rises. One recently posted Twitter message to a bank said, "Stop making your living off my late fees! You fine me more than you loan me!"

Perhaps the most compelling argument for social media lies in demographics. "A generation immersed in online social communication will expect to be able to access those new communication paradigms when they enter the workplace. They have an intuitive feel for how to exploit these technologies, and finance has to embrace them to remain relevant," according to ComputerWeekly.com.

There's a significant potential for the industry to reform around a different model of supply for financial services. "This has potential to radically reduce costs, improve flexibility, and deliver the various services required by a broader base of users, while mitigating the scale of investment required," notes ComputerWeekly.

The social networking model is ideal for niche participants, they add, as "a diverse universe of small providers is inherently more fault-tolerant and less exposed to systemic shock than massive institutions."