Banks Must Tread Carefully When Choosing a Social Media Partner

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Frank Eliason has learned to be skeptical about pitches and promises from social media vendors.

Buyers "must use caution," says Eliason, senior vice president of social media at Citigroup. "Anytime I hear, 'You must have this,' I get concerned."

If a vendor boasts to Eliason, for example, that it can help Citi send tailored marketing offers to customers through social media but the vendor's pitch arrives in Eliason's spam filter it's a bad sign.

"If you're so good at it, why didn't I hear about it through social media?" Eliason says. "Banking is a relationship business. So are banks' relationships with vendors: they center on trust."

Before striking a deal or even shopping for a vendor, you should set clear objectives, Eliason says. If you know precisely what you want and can articulate that to the vendor, you minimize the chances of a misunderstanding. Bankers, consultants and lawyers warn that miscommunication in vendor negotiations can lead to compliance issues, penalty fees or reputational damage or an out-and-out public relations disaster.

It's also a good idea to try a vendor's cloud-based tools before signing any contracts, Eliason says.

"Don't be afraid to ask," he says.

Not only will the test trials help you see whether the technology works, they will also show whether the tool aligns with the company brand, Eliason says.

Technology will not change a brand's "culture," Eliason says. "The tool must fit the culture. Every company is a little different."

One of Citigroup's newer social media partnerships is with Sprinklr, provider of an enterprise social media management system. The bank has used the tool in the United States for a few months and is in the midst of a global rollout.

"We had parameters and knew what we needed to accomplish," Eliason says.

"These tools are changing rapidly, as are the social media sites," Eliason says.

Lawyers and consultants say it can be difficult for banks to keep up with these sites' updates to terms of use and privacy settings.

"That security assessment you did at the beginning of the relationship with the vendor, especially in social, could change significantly within six months," says Mercedes Kelley Tunstall, of counsel at Ballard Spahr in Washington.

Banks using outside companies to serve as the voice of the bank in social media must be particularly careful, Tunstall says.

In the social channel, which demands quick responses, an outsider may see what he perceives to be a run-of-the-mill consumer complaint and hastily respond in a way that causes more trouble, Tunstall says.

Banks should monitor the social media activity of such partners, she says.

Edward Kramer, executive vice president of regulatory affairs for Wolters Kluwer Financial Services, offers similar advice.

"Periodically review what is actually happening in real time," Kramer says.

Managing outside relationships is difficult for banks of all sizes.

"A lot of banks are doing their most innovative work by working with smaller technology companies," Tunstall says, and that has its pitfalls.

Among the issues some banks face when working with younger startups is their eagerness to trumpet their big wins. In typical vendor contracts, a bank stipulates a no-press-release clause about the relationship if it's worried it will be seen as endorsing a company.

"This is pretty easy to lock down and control in paper and TV," Tunstall says.

But now, young companies itch to make announcements through social media channels to the point that they will accept less in fees in order to announce the wins, she says. Banks should stay tuned to how their partners distribute the news.

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Comments (3)
I disagree with Tunstall's statement that an "outsider may respond to a consumer complaint in a way that causes more trouble". Well-established social media companies take the time and effort to understand their customers business, so they can quickly respond with appropriate, relevant and timely answers. That includes creating a list of commonly asked questions which have a pre-determined message which the bank has approved in advance, as well as an escalation process should the customer become belligerent.

If you feel your third party vendor might agitate a customer with their poorly worded messages, it might be time to find a new, experienced firm.
Posted by IKnowSocial | Friday, June 21 2013 at 4:07PM ET
My understanding is she meant the non-expert outside service providers(not including social media agencies, for example) that may lack access to all the necessary data.
Posted by Mary Wisniewski | Friday, June 21 2013 at 4:37PM ET
Banks and many other organizations frying to enter social media generally have the wrong strategy. Its not a socialmedia strategy you need. It is a content publishing strategy that uses social media to pull people to the great content you post on your website. Listen to this podcast of my talk at the NJBankers marketing conference onthis topic. http://www.lubetkin.net/loc-podcast-51-steve-speaks-on-content-publishing-at-njbankers-marketing-conference-june-4-2013/
Posted by PodcastSteve | Saturday, June 22 2013 at 11:50AM ET
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