Evaluating the Pros and Cons of Banks Using Facebook
By Marv Chen and Kevin Tsuei, AuditOne LLC
As the world is atwitter with mounting evidence that social media play a critical role in both topping sales charts and toppling governments, it’s time to address the question of whether banks might employ technologies such as Facebook in their marketing mix.
According to a recent report by Datamonitor, social media in general has yet to gain traction in the banking world. Only 14% of the surveyed banks currently use social media for marketing, and 60% said they have no plans to do so.
However, with more than 500 million active Facebook users worldwide, it is probably only a matter of time before the banking world catches on to social media’s marketing potential and moves forward to get a jump on the competition.
But such a move is not without risks and challenges, particularly for smaller community banks lacking depth in their in-house IT support. This article aims to help understand those risks and the mitigating measures that can be taken.
Currently, there is no regulatory guidance on social media, but a quick search on Facebook reveals that even the FDIC has its own Facebook page. While several banks clearly display their own Facebook pages, as is true when embracing any new technology, there are risks involved.
One of the features that can make your website more socially interactive on Facebook is the “Like” button, which acts as a notice subscription feature. When a user clicks on the Like button from the bank’s webpage or Facebook profile, that user becomes a subscriber or fan to the bank’s Facebook page.
Whenever an item is posted on the bank’s Facebook “Wall,” it will also appear on that user’s news feed. This allows users to receive an up-to-date notice about any new information, products, or services the bank wishes to share with them. In addition, what users Like will also appear on their own personal Facebook Walls, essentially sharing the bank’s Facebook page with the users’ friends.
As mentioned above, the Wall is another intriguing feature Facebook offers. Not only can banks use the Wall to communicate with the outside world, but they can use it to interact with that public as well. However, because a clean white wall irresistibly invites taggers, we highly recommend banks restrict the ability of users to post comments on the Wall.
An unmonitored Facebook Wall can lead to bad publicity or worse, such as leakage of confidential or non-public personal information. For example, customers can inadvertently post sensitive information, and disgruntled employees or unhappy customers can leave very negative comments.
Another less obvious risk resulting from giving Facebook users the ability to post on the Wall is the problem associated with social engineering or phishing. It isn’t hard for a hacker to become friends with customers or employees who have made comments on a bank’s Facebook page. Once hackers befriend a customer or employee, they can then mine Facebook profile information to launch targeted social engineering and phishing attacks using a bank’s name and inside information.
It’s also important to maintain control of the employees who manage your bank’s Facebook account. A disgruntled employee can do much reputational damage with social media websites such as Facebook.
Facebook allows multiple administrators to a Facebook Business page, but additional permission settings for administration of the page are few and not very granular. There is one serious risk with this feature: an administrator can remove any other administrators at will, and as of the time of this writing, there is no notification when an administrator is being removed. It’s obvious how troublesome this can be if a disgruntled employee has administrative access to a bank’s Facebook page.
In the end, it is up to banks to determine whether the risk of having a Facebook page is worth the reward. Opinions are mixed on whether Facebook can actually help add to the bottom line, but then again, it depends on the individual bank’s marketing strategy. Some banks might be seeking the rewards gained through increased brand name recognition while others are seeking more quantifiable returns.
One thing is certain, while Facebook will continue to play a critical role in social, political, and economic arenas from here on out, it is absolutely critical that banks considering its use must strategically think it through, develop sound policies, understand and guard against the potential pitfalls, and continually monitor its interactive power on an ongoing basis. Only then will banks “Like” using Facebook.