A banker’s guide to Facebook’s new advertising rules

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When Facebook announced a new set of rules for advertisements related to housing, employment and credit, they largely weren't directed at banks, which have to be careful about how they advertise given their own set of regulations.

But the restrictions and the overall blow to Facebook's reputation over the past year are giving banks' marketing and compliance departments extra reasons for caution.

“This will just force marketers to do something they probably should be doing anyway, which is think more deeply about the traits they really want to target in their customers,” said Brandon Verblow, an analyst for Forrester Marketing and Strategy. “That’s going to produce better results for advertisers than using these more blunt targeting measures.”

What’s in the new rules

Facebook’s first new rule says credit providers can’t target ads based on gender, age or multicultural affinity. This shouldn’t be an issue for most banks, which need to be careful not to market along these lines anyway. For example, under Regulation B, banks can’t consider race, color, religion, national origin, gender, marital status, age or whether someone is a recipient of public assistance in determining whether or not to provide service.

There’s also a new rule about advertising to people based on their location. Housing, employment and credit ads must have a minimum geographic radius of 15 miles from a specific address or from the center of a city. Targeting by ZIP code will not be permitted. Banks already operate under laws that forbid them from considering ZIP code as a factor in lending decisions and that require them to serve everyone in their natural market.

Yet Facebook's new rule could limit them further.

Dan Goldstein, president and owner of digital marketing firm Page 1 Solutions, has clients that use ZIP code-specific targeting and geofencing ads — for instance, to reach people attending an event. Such tactics will now be off limits to any company providing credit.

“This will be more limiting and will make it harder for them to target their ideal customers,” said Goldstein, a former attorney who worked at the securities and corporate practices division of the Office of the Comptroller of the Currency.

David Hawkins, principal at the customer experience firm Incite CX and a former banker at Huntington Bank and Umpqua Bank, sees the geographic rule as an extra layer of complexity and one more thing to track.

"Beyond the upfront work to understand the geography and make coverage decisions, it would be hard to trust Facebook and so I would feel the need to continually monitor/follow up," Hawkins said. "One more thing on the to-do list."

Facebook ads also cannot target people based on race, color, national origin, ethnicity, gender, age, religion, family status, disability and sexual orientation, among other protected characteristics or classes. Fair lending laws already prohibit creditors from prescreening credit applicants based on the applicant’s race, sex, national origin or other prohibited personal characteristics.

Facebook’s Lookalike Audience tool, which helps advertisers identify Facebook users who are similar to advertisers’ current customers or marketing lists, will no longer consider gender, age, religious views, ZIP codes, Facebook Group membership or other similar categories when creating customized audiences for housing, employment and credit providers. Banks have already been leery of the “Lookalike Audience” feature, fearing they may run afoul of fair credit and discrimination rules.

Advertisers will be asked to create ads related to housing, employment and credit in a special portal. If Facebook detects that an advertiser has tried to create an ad outside of the portal, Facebook will block and reroute the advertiser to the portal.

Impact on banks

Facebook declined to share how many banks advertise on its platform or how much they spend in so doing. The company also declined a request for an interview. Verblow doesn’t anticipate that banks or other companies will reduce their spending on Facebook ads as a result of the new rules.

“It will probably make things more difficult, but we’ve seen marketers figure out a way to figure out a new solution that works within the current confines,” Verblow said. “The general data protection rule in Europe was a huge set of regulations aimed at restricting what advertisers could do and we didn’t see much of any effect on Google and Facebook over the past several quarters. In this case, it may take a while for advertisers to figure out what works in the new system.”

Banks are already careful about advertising on Facebook.

“There's always been a lot to be of afraid of with social media platforms like Facebook and YouTube and their ability to provide advertisers with so much data about their audiences and not too many restrictions on how that data gets used,” Hawkins said.

But financial institutions do like the idea of micro targeting.

“Everyone wants to spend their limited ad dollars as efficiently as possible,” Hawkins said. “Unfortunately," Facebook advertising "is tailor made for discrimination and that's particularly troublesome for bankers."

Additionally, banks can't rely on players like Facebook and Google to police themselves when it comes to malign use of their platforms, he said.

"Compliance teams need to be even more alert and involved in reviewing not only the content being displayed, but also the targeting criteria of the marketing teams directing their social media buys to make sure that there is no intentional or unintentional excluding of whole classes of viewers," Hawkins said. "For already strained compliance teams, it's one more risk to have to weigh before giving the OK for social media-focused product offers. It probably makes more sense for banks to focus their social media efforts on brand and awareness-building campaigns and not on product offers.”

Goldstein noted that the legal settlement which forced the creation of the new rules is just one in a string of black eyes for Facebook that have affected banks.

Last year, Facebook tried to get banks to allow it to access customers’ account information through Messenger. Earlier in 2018, there was the privacy debacle when it came out that Cambridge Analytica was using Facebook users’ personal information for political campaigns.

“We’re going to continue to see more efforts to limit digital advertising that uses personal data to target users,” Goldstein said. “It’s going to force not just banks but all advertisers to be more creative. I think that’s not a bad thing, because it forces you to use not just pure targeting, but to be creative in the way you message to consumers to make sure you connect with them more directly on a personal level, even though you’re now not able to target more sensitive areas like age, gender and race."

For instance, banks might target people who live in mountainous areas, without specifically targeting the town in which they live.

“It forces advertisers to find things that would connect on an interest level and engage with customers on a more emotional level,” Goldstein said.

"Ultimately, I think this is a positive development for brands and consumers alike,” he said. “Brands regardless of industry should be striving to understand who their customers are at a deeper level than categorization by gender, 'ethnic affinity,' etc., can provide. This will require more analysis and greater creativity on the part of advertisers, especially those in highly regulated industries, but the restrictions created by a loss of ad categories should make it possible for businesses to see a better return on paid Facebook campaigns.”

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