Facebook's 200 million user community is a tantalizing customer pool, and many banks have been quick to jump into the social networking community by setting up their own Facebook pages. But despite its vast size and exponential growth, banks are finding that Facebook does not translate easily into a marketing platform. Many argue that it may never. "I'm not aware of any bank that's been successful with Facebook," says Jacob Jegher, a senior analyst at Celent. "People don't log onto Facebook for banking, but for friends. I just don't think that Facebook will drive business profitability." At best, Jegher says, it's "experimental marketing," but not a viable business strategy. "There are better ways to build and solidify customer relationships."

Ron Shevlin, a senior analyst at Aite, says that the focus on Facebook is a case of the tail wagging the dog. "Banks need to start with their strategic direction, not the channel. Banks do not need a social media strategy, they need a business strategy."

Banks haven't helped their cause by putting up static Facebook pages without transactional capability. The pages often redirect people to a bank's Web site for even the most basic product information, which analysts say is antithetical to the social networking premise. "In the mind of the consumer that is not helpful. Facebook needs to be a real outpost of the bank; it needs to be tied to products and service," says Andy Schmidt, the research director for global payments at TowerGroup. "Banks need to provide a reason to show up and stay, and banks haven't done that yet."

That's a tall order, analysts say, and it may never happen. Tapping Facebook will require banks to master a tricky mix of entertainment, sales and information - while maintaining the highest level of security. Yet Facebook has been inconsistent with its privacy and personal data policies. There are also scalability issues, integration issues and audit and compliance issues that banks must tackle before Facebook can become a true outpost. "Overall, there are pretty significant barriers to a quick and cost effective deployment," says Emmett Higdon, a senior analyst at Forrester. "Social media tools are not business grade."

There's also a lack of data to support a business case for Facebook. Jegher says he hasn't seen any data on "stickiness," whether the "friends" on a Facebook page ever come back. What's more, says Shevlin, the numbers that are available can be misleading. He recalls when Washington Mutual put up its Facebook page in 2008 and proudly announced that it had 250 to 300 fans in the first 24 hours. But he did a little digging and quickly found that at least two-thirds of those fans were connected to the Web design team.

One application that does allow financial institutions transactional capability on Facebook is Fiserv's MyMoney, which is now only available to credit unions, though Fiserv plans to offer the product to banks in the coming months. (See sidebar) Facebook users download the application, which helps them find and join a credit union, check balances, view account histories and make transfers. So far, there are 16 MyMoney clients and 2,870 Facebook users who have added the application. Another 32 credit unions have signed up and should go live later this year.

Kirsten Gardner, product marketing manager for credit union solutions, says MyMoney uses 128-bit encryption to keep data secure and has a viral marketing aspect. When members add MyMoney to their Facebook profiles, the application notifies their Facebook friends and invites them to add MyMoney as well. Fiserv is also contemplating additional functions, such as person-to-person payments, which could allow Facebook users to pay back a friend for tickets to a concert, or split last night's dinner.

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