Banking on Twitter and Facebook: Wells Fargo's Smart Social Networking Strategy

Last Updated Apr 1, 2010 3:44 PM EDT

Anyone up for a lambada lesson, some skydiving and a tutorial on the basics of money management? If so, all three are available over at Wells Fargo's (WFC) "Stagecoach Island" virtual world. The site is but one example of how the financial giant is using social networking to bond with customers, advertise, and put a friendly digitized face on the company.

Wells isn't alone. A range of financial institutions, such as JPMorgan Chase (JPM), Fiserv (FISV) and MasterCard (MA), are on Facebook, Twitter and other online forums. For now, most companies use the sites for branding, marketing, and fostering financial literacy. But a handful, like Wells, use social networks to connect more directly with people, and even to conduct transactions.

"It is imperative that financial institutions map out social media strategies, gain familiarity and comfort with social media, and establish themselves on Facebook and Twitter," writes an analyst with Javelin Strategy & Research, a financial industry consulting firm, in a new report.

Why? For one, that's where a growing number of people, including bank customers, spend much of their time. And odds are they're talking about their institutions, and often not in a happy way. Take "I hate Bank of America" on Facebook or Twitter's "GoldmanSachs666." Companies need to be part of the conversation, if only to hear what folks are saying.

Beyond damage control, social networking offers financial firms a way to connect with customers in an environment they find comfortable. It's also a potentially powerful platform for extending online and mobile banking services, such as financial alerts and planning tools.

Easier said than done, of course. The major obstacle: fear. More than 50 percent of U.S. adults spend time on social networks. But nearly as many have concerns about the security of these sites, and fraud is rampant. For one simple reason, the problem is worse for banks. Social networks are for sharing; by contrast, people are understandably reluctant to disclose anything about their financial situation on a public forum (For the record, I will divulge that I'm not a billionaire.)

Most consumers also remain fuzzy on how social networks can help them manage their financial lives. By more than a 7"to"1 ratio, bank and credit union customers say they're unlikely to interact with their institution through a social network, Javelin found.

Another hurdle is that social networking, despite its communal appeal, is in many ways an intensely personal affair. I'm on Twitter, for example; but I'm not sure how I feel about my bank reading my tweets. It's also a new medium, with discrete customs and sensibilities. That can make it tricky for companies to find their place in the networking ecology without coming off as intrusive, or just plain dorky.

As a result, most financial institutions use such applications sparingly, or not at all. But a handful are doing innovative things. Some, like Wells, are global corporations experimenting with a range of networking tools. Others, including Baltimore community bank 1st Mariner, are minnows taking a narrower approach.

For better or for worse, the genie's out of the bottle. Expect social networking to become a standard part of using financial services. Here, courtesy of Javelin, are five industry players that are leading the way:

Wells Fargo Why using social networking: Customer engagement, education, branding Offerings:
  • Stagecoach Island virtual world
  • Public blogs, including sites related to personal finance and the environment
  • Twitter feeds focused on customer service and financial tips
  • Facebook pages
  • Youtube channels targeting retail, wholesale banking and small business customers
MasterCard Why using social networking: Communications, branding, marketing, customer service Offerings:
  • Twitter pages focused on consumer and corporate information
  • YouTube channel featuring "Priceless" ad segments
  • Online widgets for budgeting and viewing personal finance videos
  • Facebook tools to help shoppers find gifts
  • iPhone applications that let users share restaurant reviews and travel tips, and also to find ATMs
1st Mariner Bank Why using social networking: Branding, customer service, communications Offerings:
  • Twitter pages for customer service and for corporate info
  • Facebook page featuring info on local news, user conversations and humorous videos
  • Blog focusing on financial literacy and community events
Fiserv Why using social networking: Boost profits by allowing customers to access bank acounts Offerings:
  • MyMoney, a Facebook-based application that lets users monitor and access their bank accounts, including checking balances and transferring funds
JPMorgan Chase Why using social networking: Branding, marketing, financial literacy Offerings:
  • Chase +1, a Facebook page where college students can apply for credit cards
  • Alain Sherter On Twitter»

    Alain Sherter is an award-winning business journalist who has written for The Deal, MarketWatch and Thomson Financial Media.

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