What Every Financial Institution Should Know About Social Networking

Social network to promote yourself and business

The aim of any business will be successful and profitable through the duration of the organization. The evolution of communication technology in recent years has helped get this to possible by improving a business's ability to network with its existing and potential customers. What once required face-to-face conversations and the physical exchange of contact information may now be performed in a completely virtual environment with only a click of a button.

Advances in communication technology, such as for example texting, blogging, emailing, media sharing and gaming, have created new social norms and revolutionized just how people communicate. It is no wonder, then, that the financial services industry is beginning to make use of various forms of Computer Mediated Communication (CMC) to improve customer support and improve current products and services. The most popular kind of CMC are social networking websites such as for example Twitter, Facebook, MySpace, and LinkedIn, which are employed primarily to steadfastly keep up or build connections among users.

Social networking sites represent a big market with tremendous growth potential that may be easily targeted by financial institutions if they understand how to use these sites for their advantage. Like many organizations that have already experienced the benefits of using social networking sites to improve their business, financial institutions are beginning to comprehend and embrace the power of social networking because it relates for their day-to-day business activities as well. Whether educating customers on new services, boosting customer confidence, increasing sales outreach or personally connecting using their customers to meet their banking needs - social networking is an essential communication tool that financial institutions can utilize in several of their customer business interactions.

Understanding Social Networking
Social networking is a form of collaboration and networking where individuals develop groups and associations, often forming a virtual community. While social networking is possible in a face-to-face setting, such as for example on a college campus, it is usually seen online in a CMC environment . The size and popularity of the "communities" created by MySpace and Facebook and other social networking websites have seen substantial growth as more and more folks invite their acquaintances, co-workers, friends and household members into these virtual communities.

The standard roles of the sender and receiver involve delivering messages in a definite and concise way and providing feedback to attain agreement of a certain subject. Social networking uses these same basic building blocks but accomplishes the conclusion results in a slightly different way Social network to promote yourself and business. The cues that help facilitate understanding in a face-to-face environment (e.g., intonation of voice, body gestures, facial expressions, physical distance, etc.) are often removed in a social networking environment. Although some websites offer an audio visual element, social networking is largely text-based, depending on "digital gestures" to show emotions and add emphasis to a note, such as for example:

• Forwarding.
• Recommending.
• Sharing.
• Tagging.

Social Networking Applications for Business
Networking happens to be an integral success factor available world. Networking involves linking together folks who, through trust and relationship building, become walking, talking advertisements for one another. Traditional networking often happens face-to-face at business lunches, conferences or exhibitions, where people are able to meet and establish mutually beneficial working relationships.

Online social networking offers many of the same benefits as traditional networking, while allowing bankers to easier network with the average consumer in addition to using their colleagues in the financial industry. Used appropriately, online social networking offers businesses the ability to develop meaningful, long-lasting customer relationships.

A study of the banking industry and the ways by which several banks'board members networked with others showed that though these professionals are enthusiastic about using networking to secure clients and to steadfastly keep up and develop existing customer relationships, in addition they want to make use of networking to represent their banks in community, professional and trade organizations and to procure market trends and competitive information.

To achieve the goals identified in this study, board members and other bank employees must first understand what social networking is and how it can be utilized to position their banks above others in the industry. If properly trained, these employees can use social networking to attain their banks'organizational goals and place their banks in the most truly effective positions in the industry in these five ways:

• Community building.
• Product research.
• Customer service.
• Marketing and promotion.
• Transparency.

Social networking is currently getting used to bolster the reputations of the financial institutions that utilize it, providing information both internally and externally. This kind of information sharing builds consumer confidence and helps employees understand the importance of their roles inside their banks and how they should strive to attain the greatest standard of customer service.

Challenges of Social Networking in the Workplace
One of many first challenges of integrating social networking with the workplace is helping employees understand the importance of using this technological tool. Another challenge is in addressing the training needs of the business to bring all employees up-to-speed on the etiquette, functionality and general norms of this kind of medium. This means determining who will be maintaining the web sites, how end users will experience the web sites, and how policies and procedures concerning social networking will be shared, and with whom within the organization. And finally, relationship management in a virtual environment poses a challenge. This last challenge should be a primary focus when implementing a social networking-friendly policy or procedure.

A lot of the CMC occurring in social networking happens through what's become referred to as Social Information Processing (SIP) theory. The theoretician who first introduced SIP, Joseph Walther, stated that the nature of relationships created online can be drastically different from those established face-to-face, specially when individuals act differently than they'd in a non-virtual environment. While Walther acknowledged that the rate at which these relationships are formed may change over time as individuals become more familiar with the technology, he argued that relationships in a CMC environment would take around four times longer to establish.

To counter this potential limitation, banks might seek to make use of the idea of attribution, which states that individuals link observed behaviors of others with causal explanations to help them understand what sort of people they are communicating with. Enough time to develop relationships can be shortened using attribution theory because bankers can use their observations to produce product or service recommendations predicated on needs they have established.

Using Social Networking to Relate solely to Customers
Though social networking poses its challenges, it may also be used to overcome other challenges that banks may face. For example, social networking allows financial institutions to enhance consumer confidence, increase sales, and strengthen customer relationships, which are typical aspects of concern as they could give a bank a competitive edge over others in the banking industry.

When consumer confidence is low and distrust of the banking industry is high, particularly in times of economic crisis, social networking has allowed for greater transparency and has opened up a conversation with consumers. People forum created by websites like Facebook, Twitter, LinkedIn and MySpace supply the financial services industry an ability to address customers'banking needs by:

• Acting as a moderate for customers to send their questions and concerns to a bank, with immediate feedback from the banking expert.
• Replacing one-sided information dissemination like press releases or bank-sponsored advertisements.
• Reassuring the public of safety and soundness policies and procedures.
• Eliminating skepticism through informative links, text, graphics and audio or visual elements.
• Educating customers about products and services that address specific needs.

Protecting Customer Information
One of many main concerns of financial institutions is the protection of information and financial assets. As technology helps it be easier to speak with people in remote locations or to conduct financial transactions, additionally it enables thieves to acquire customers'confidential, nonpublic information, putting customers at risk of identity theft and other similar schemes.

Financial institutions have addressed these potential information security breaches by creating Know Your Customer (KYC) programs and prioritizing identity verification and the reporting of suspicious activity. Exactly the same precautions and care should really be exercised when using social networking websites to ensure that customer information remains protected.

Implications for Legal Compliance and Record Keeping
Once a financial institution's directors and staff understand the implications and proper usage of social networking websites, it is essential that the institution's policies and procedures be revised to reflect the addition of these new business activities. This ensures that the institution remains in compliance with industry laws and regulations, and it demonstrates to the public that the business is fair and respectful of customers and employees and so it works to protect its customers'information and financial assets.

The Financial Industry Regulatory Authority (FINRA) recently issued a publication that provides guidance to financial institutions regarding the utilization of social media in their business operations. FINRA Regulatory Notice 10-06 outlines the mandatory recordkeeping requirements that financial institutions must adhere to and provides guidelines for the supervision of non-static messages sent social networking websites.

Because social networking websites are fairly new and financial institutions are only just just starting to explore their potential uses, the twelve government agencies that control the financial services industry, along with other organizations like FINRA, are continuing to develop and amend regulations. For example, the utilization of social networking affects advertising requirements for financial institutions, as previously mentioned in Regulations Z and DD. In addition, it affects Federal Deposit Insurance Corporation (FDIC) membership, Federal Housing Administration (FHA) and non-deposit retail investment and fair lending implications. It is the responsibility of every institution to keep yourself informed of current regulations and how their usage of these websites affects their compliance current law. Management must also understand the risks of noncompliance and be sure that their policies and procedures are updated to reflect these changes.

Final Word
Financial institutions must consider the risks and rewards of using social networking tools in their everyday business operations, and ensure that these tools comply with policies and legislation, while meeting the wants of their customers. Because clients are the driving force for success in the financial services industry, the main element to protecting them is through employee education. It is imperative that bank employees are appropriately trained before and during the utilization of almost any social networking tool. Understanding how this new kind of communication impacts the business in the long-term can help a financial institution arrange for and attain future success, while emphasizing keeping customer relationships strong and information and financial assets secure as social networking becomes an even more prominent business tool.

Dr. Linda Eagle is Founder & President of The Edcomm Group Banker's Academy-a 23-year-old education and consulting firm dedicated to serving Banks, Credit Unions, Money Services Businesses (MSBs) and all aspects of the Global Financial Community with a large number of generic and customized training programs in areas such as for example BSA/AML, Regulatory Compliance, Teller Training, Systems Training, Sales and Service Training, and many more.