Small banks may face social media obstacles

It’s no secret that social media platforms are becoming more instrumental in reaching out to various demographics, introducing new banking products, driving customer loyalty and responding to feedback. However, a new report sheds light on the obstacles smaller banks and businesses may face in adopting and utilizing these communication mediums, according to American Banker.

Social media, as a portal for communicating with clients on basic day-to-day transactions and products, can be an effective strategy for strengthening customer relationships. However, when this type of communication gets deeper into advertising and marketing, American Banker reports legal and compliance issues may arise that smaller corporations and banks lack the financial resources to properly manage.

Possible solutions

In order to stay competitive and possible circumvent legal issues that may arise, banks and small corporations can enlist the assistance of professional compliance services to provide guidelines and protocols for web content and security issues. According to Jackie Marshall, IT regulatory compliance director at ProfitStars, the information provided to organizations is derived from the Federal Financial Institutions Examination Council.

“Because the FFIEC guidance provides standards for all types of tech-focused products and services, it’s a natural extension to consider social media, because it’s based on the use of technology by internal personnel and by the public to establish the presence of the financial institution,” Marshall said.

New uses of social media

Finding ways to navigate potential social media issues may become even more pivotal in the coming years as many large corporations begin using these networks to determine loans and pricing information. While this type of social media use is still in the works, experts say its likelihood is strong and many institutions are already researching the most effective ways to put this plan into motion.

Although there is some controversy as to how effective using social media data to set pricing would be, analysts say that credit bureaus and scoring models have been factoring in alternative consumer data for years and social media is likely to be next in line. Further, experts say that many peer-to-peer lending websites have already begun using social media data as a factor in credit and lending decisions.

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