Social Media Creates Bank Opportunities, Pitfalls

NEW YORK ( TheStreet) -- Citigroup's ( C) CEO Vikram Pandit may be the only one of the big four bank CEOs with an official Facebook page, but the bank is not the only institution engaging in social media.
Bank of America has six customer service reps assisting customers on Twitter.

Several banks are shifting their business to utilize social media to engage customers, according to Jeffrey Dachis, CEO at Dachis Group, a social technology firm. Other large banks, such as Bank of America ( BAC) and Wells Fargo ( WFC) are using Twitter and blogs to speak with customers and inform them about the latest initiatives the bank is taking.

"Shareholders should care that Citigroup is using social media. Shareholders, vendors and customers are talking about Citi's products and this is a way for Citigroup to engage them," says Dachis. "It makes Citigroup appear more trustworthy. The idea that they are communicating makes it seem like it is a more authentic Citigroup."

Bank of America joined the social media frenzy several years ago by joining Twitter and has since created seven Twitter handles to help with customer inquiries.

"Given the amount of time that people are spending online and when you see how people are using social media to answer questions. Yes, our shareholders should care," says Chris Smith, enterprise social media executive for Bank of America.

Bank of America has 15,000 followers on Twitter for the handle @BofAhelp, which is managed by six customer relationship managers. Smith says the handle has a high satisfaction rate. Smith adds that customer problems are often resolved offline, over the phone or by email, but the initial engagement is over Twitter.

"We are deepening our relationship with customers through social media," said Smith, who believes banks' presence on social media channels will only increase going forward. "Much of the industry, including us, is still trying to figure out to apply it best to the business."

Besides its Twitter accounts, Bank of America has a YouTube Channel, blogs, LinkedIn networks, a Flickr account and has plans to expand on Facebook. However, it's doubtful that Bank of America CEO Brian Moynihan will have a personality page on Facebook if he is not using it himself.

"People spend 25 percent of their time on Facebook and the internet. People are looking for services and information. We want to make sure there is a human connection. If we can't add value to a network we are not going to join it," said Smith.

Social media experts agree that banks should tread carefully to using the platforms. Several parody Twitter handles and Facebook personality sites have sprung up over the past few years focusing on banks and the CEOs and it may be hard to know which sites are run by the companies themselves.

In addition, social media experts caution companies to use personalities for marketing company brands. Citigroup's Facebook page for CEO Vikram Pandit is a "marketing ploy" and a good example of what not to do when using social media, says Dave Surgan, manager, social strategies at Morpheusmedia.com.

"Social media is for conversations. If you are not ready for a dialogue then stick with your traditional marketing and communications strategies," says Surgan. "Pandit's fan page lacks a personal voice found throughout most successful social media initiatives. With only 1,574 'fans' and minimal interactions per post, it appears Pandit is not creating content resonating with the community."

Surgan says that this page would be more effective if Pandit was actually using it along with the marketing.

"It is tough to gauge how this provides transparency since the page is only used for one way publishing," says Surgan. "Banks can utilize their existing corporate fan pages to provide their CEOs with a platform to communicate with shareholders."

--Written by Maria Woehr in New York.

To contact the writer of this article, click here: Maria Woehr.

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