Banking Law

One of the sessions I attended at last week's BAI Retail Delivery conference in Las Vegas was entitled "Using Social Media to Understand Your Brand," and was given by Brad Smallwood, the Director of Pricing and Analytics for Facebook, and Jesse Goranson of The Nielson Company. It was a worthwhile session, even (or perhaps, especially) for a lawyer who doesn't drill down as much on the marketing aspects of social media as on the legal issues. During the Q&A session toward the end of the program, a bank officer stood before a microphone and asked the panelists in a quasi-exasperated, quasi-pleading tone, "How does a bank dive into social media marketing when everything has to be run by legal?" There were murmurs of sympathy throughout the crowd, evidencing that the general pain-in-the-kiester view of lawyers by bankers is still strongly held by bankers. The panelists were unable to answer the question directly, other than to suggest that unless the bank changes its culture, social media marketing may be a non-starter.

I wanted to jump up and suggest a few things, but restrictions on solicitation and the fact that it wasn't my seminar made me wisely restrain myself. On the other hand, nothing restrains me from providing a few educational tips on this blog.

Since most banks that use social media do so in order to engage their customers and potential customers in "conversations," it won't work if everytime the bank opens its mouth to speak, some pinstriped pinhead has to bless the bank's end of the conversation in advance. Instead, I'd suggest that legal risks to the bank can be effectively mitigated without lawyers "killing the conversation."

Although reasonable people (and unreasonable people like me) may differ on which factors of risk-mitigation in social media marketing by banks are the most important, I'd suggest two critical techniques of risk mitigation: (1) having the "right people" supervise and participate in the bank's social media forums, and (2) the bank having in place the right "legal infrastructure" for the social media it sponsors.

As to people, I think that the best defintion I've heard of the ideal person to run a social media effort is a "marketing technologist." Unfortunately, I can't recall who coined that term, but it indicates a person who understands how to effectively market or "brand" the bank and also understands the special strengths and weaknesses of the social media being used to do the "branding." It's not purely a "marketing" department function nor purely an "IT" function. It's two [click]...two [click]...two functions in one.

Inasmuch as the bank's personnel who participate in social media are going to be engaging all kinds of people in conversations, including not only people as nice as your grey-headed grandma, but also tin-foil hat wearers and professional jerks, it helps to have a thick hide. In my experience, it's also true that in this arena, nice guys finish first. The same traits that make a great customer service representative often make a great social media representative. In other words, a guy like me is the last person on Earth you'd want to handle your social media "interface" with customers.

As to "infracstructure," that involves having in place the right internal policies and procedures and external "terms of use," "terms of service," "rules of the road," disclaimers, warnings, and other "documentation" that is drafted or at least "vetted" by the bank's lawyers. It also involves (a) training employees who will participate in social media as to what they can and cannot say and do; (b) periodic monitoring (by management and legal) of both sides of the "conversation" to detect any deviation from the rules that govern employees and customers use of the social media; and (c) fair and consistent enforcement of the rules. "Infrastructure" is where the lawyers can play a role in "teeing up" social media without "gumming up" or slowing down the conversations, except on those (hopefully) rare occasions where the conversation starts to present undue risk to the bank.

There are common sense ways to approach these issues, and lawyers can be facilitators rather than conversation killers. Obviously, "everything has to be run through legal" won't work if applied strictly. On the other hand, "anything goes" presents unacceptable risks to the bank. Finding a happy medium is not all that difficult if both the bankers and the lawyers involved understand social media.