With the ability to easily reach billions of consumers across the globe, social media is becoming one of the largest platforms for marketing today. Banks and other financial institutions are quickly hopping on board and utilizing social media in an attempt to humanize their brand and “rid their staid reputations,” according to American Bankers Association’s recent report The State of Social Media in Banking. While social media can be a great tool for banks to engage with the community and their customers, it can also pose several challenges when it comes to regulatory compliance.
Globally, there are 3.2 billion people using social media today-that’s 42% of the population! Marketing through social media is a cost effective way to potentially reach and interact with millions of consumers. Consumers typically spend 2 or more hours on social media daily, providing banks with a great opportunity to get their name and message in front of them. Additionally, 54% of people using social media use the platform to research products and services before they buy. Overall, marketing through social media allows banks to be present where the conversation is happening.
According to ABA’s report, 84% of banks surveyed agree that social media is important to their organization. Some of the top uses for social media include communication with consumers (91%), marketing and sales (84%) and risk management (76%). Among the many platforms available, Facebook, LinkedIn and Twitter are the most used for marketing purposes. Additionally, 71% of banks are using paid advertising on social media, mainly on Facebook. As a whole, banks are using their social media platform to “educate, inform, entertain and celebrate.”
Just like any other consumer facing channels, social media must be within regulatory guidelines. According to the ABA, “if there’s a bleeding-edge legal issue with social media, it’s around compliance, especially when using social media for business development.” 68% of banks surveyed reported that social media was reviewed in their organization’s last regulatory exam, with regulators looking closely at policy and procedures, monitoring and employee training.
Another big area of potential risk for banks is their employees‘ use of social media for an online business presence (especially client-facing employees such as personal bankers, financial advisors, etc)-“those employees need to be educated and sophisticated around social media, its potential vulnerabilities, rules and threats.” While some banks prohibit this use of social media for those employees altogether, 25% said that employees are allowed to post, however the rules to do so are unclear.
Clearly defined practices for social media are crucial for regulatory compliance. Having a tool in place and specific, well-thought-out procedures can also help address potential regulatory concerns, says ABA. If banks “have strong procedures for [their] marketing approval process, advertise cautiously and make sure [they] are complying with banking regulations,” they will be able to mitigate their risk greatly.
One of the banks stated that during their last regulatory exam, regulators “were pleased to see that [they] had a tool to control, a tool to approve, that [they] had a very specific and well-thought-out procedure to be able to use social media. They were happy that the whole bank took social media training.”
59% of banks said they were using third-party software to monitor and manage social media content and compliance. Technology is a great tool to help companies expedite the approval process and workflow, as well as monitor for compliance of published social media posts. By automating the process, banks can also keep archives of approved content, along with any remediation of compliance violations, all of which they are able to show auditors.
Learn more about staying compliant on social media with our expert guide: 6 Best Practices for Social Media Marketing & Compliance, or speak to one of our experts today.