Bank Enlists Social Media Rewards to Improve Revenue, Image

PointBank is looking to replace lost checking-account revenue by boosting its social media presence.

The bank, based in Pilot Point, Texas, will soon test BuzzBanking, a rewards program that lets customers earn points both for debit-card use and for publicizing their points-earning activities on Facebook and Twitter. The points can then be used to buy gift cards.

Besides replacing lost income, BuzzBanking also allows community banks and credit unions to more actively participate in social media while competing with rewards programs larger banks offer, says Jay Valanju, chief executive of fisoc, which provides the technology.

"Banks don't normally enter into that conversation inside social media," Valanju said. "This lets customers advocate on their behalf. It helps build a buzz."

The Austin-based company fisoc launched BuzzBanking earlier this year. There are now about a dozen Texas banks participating in the program. PointBank will do a soft rollout in March.

"This product brings a unique solution to a couple of problems," says Ray David Jr., PointBank's president. "The social media brings value to the customer, it enhances the bank’s image and it is more direct marketing for the merchant."

The BuzzBanking model allows banks to stay active in social media at a time when their participation on such sites is becoming a increasingly important. Banks that are not active in these outlets risk others hijacking their name for criticism or parody. For example, a bogus Bank of America Corp. page on Google+ lasted for more than a week in November despite the bank having its own Google+ page. This became a problem as the parody page was more active than the legit one.

The BuzzBanking model "is a way for banks to wrap their arms around social media in a productive way that engages consumers and merchants," Valanju says. "This allows them to control the message but in a fun way."

Tying a rewards program to social media is a good way for banks to get current and potential customers talking about them, says Nicole Sturgill, a research director for retail banking and cards at TowerGroup.

Sturgill did warn against updates being sent out too frequently, and says that BuzzBanking is no substitute for having a live bank employee interact with customers at social media sites.

"The nice thing is that you are doing something for the customer and then they are then essentially working for you" to promote the bank's brand, she says.

Besides providing additional exposure for the bank and its merchants, David says his bank was looking to replace lost income from a rule change in consumer overdraft protections as fewer people are using this service. The rule, which went into effect in July 2010, now requires that banks give customers the option of participating in overdraft protection services.

David says his $320.8 million-asset bank expects additional revenue from a requirement that customers make signature transactions, which are more lucrative than PIN, to earn points from debit-card purchases. (Participating merchants may set their own rules of when and how customers earn points.)

The bank will charge merchants a fee for participating in the program, David says. In exchange, merchants get information on customer patterns. The bank is also considering an annual fee for consumers.

The consumer spending data may be just as valuable for banks as it is for merchants, Valanju says.

"Banks do not understand who their consumers are because young people are not going into the branches anymore," Valanju says. "As you are interacting with the bank, this allows them to understand the customer better and the products they really need."