Social media regulation for the financial services is now a reality. But is this just another compliance hurdle, or does it offer several opportunities?
When you bring together decision-makers and regulators to look at how social media can improve trust and transparency, and create rules that provide clarity and consumer focus, it helps to foster a collaborative relationship between the regulator and the industry. This is essential for navigating a somewhat uncertain landscape. At the World Economic Forum Annual Meeting in Davos this year, social media expert David Kirkpatrick and European banking authority Huw van Steenis will come together to discuss this pressing issue in a global context.
This shift is long overdue: the use of social media in the financial services sector has been held back by teams with a muddled view of what is compliant and safe. There is a tendency to think of social platforms as subject to the same controls as traditional corporate media relations, to believe they require managing by specific spokespeople, using largely pre-approved (by compliance as well as senior management) content.
In fact, it is more helpful to liken social media to the experience of using email for the first time. What did companies do? They certainly didn't say: "Let's limit this tool to 10 individuals." Instead they said: "Let's train all our employees to use this tool as safely, efficiently and quickly as possible, and put the appropriate monitoring and controls in place to keep them and our firm safe."
There have always been unfortunate information leaks and public-relations gaffs via email, but few people suggest that companies should restrict the use of email. In fact, best practice and management tools have emerged, and as a result the majority of us have become skilled at using email. Social media is the same (sort of). The perceived technical "headache" is that it does not pass through corporate firewalls and filters, so monitoring and management is a bigger challenge. But it is a challenge that the technology industry is meeting. Greater clarity from the FCA would give companies more confidence to use social media to connect with consumers and start building trust.
We are six years on from the banking crisis, yet last year 40% of customers stated that they were losing trust in the industry, according to a survey by Ernst & Young. Social media gives both consumers and companies a voice, and research indicates that CEOs with an online presence increase their trust factor.
There are commercial imperatives for financial services firms, too:
- In 2025, 46% of wealth will be held by Gen X and Y, 75% of whom are already online.
On social media, your consumer base is increasingly active, and you need to be as well. It is crucial that companies take the time to gain the skills to engage consumers authentically and appropriately. We all know it is not that cut and dried. There's a reason why financial institutions haven't engaged already: fear of the immediacy and uncontained nature of social media. Early mistakes, such as the mockery of JP Morgan on Twitter after followers were asked to send questions to #AskJPM, shouldn't put firms off. PR mishaps happen every day, on and offline, but the last thing companies should do is communicate less.
Social media offers the chance to reach out, not just to sceptical younger generations but also within organizations that have become constricted by departmental silos, making them less able to respond to changing customer demands and leaving them exposed to a range of conduct risks.
The answer is company-wide training. Why haven't firms invested in this? Because financial-services companies haven't placed value on social media, viewing it as the reserve of the young: a fad, almost. Well email wasn't a fad and nor is social media. It may look very different in five years' time, but it's not going anywhere.
Companies that stop their employees using social media are ignoring the now almost universal penetration, in developed countries, of smartphones and tablet devices. The reality is that people will use social media both in and out of the office.
There is an opportunity here for companies to seize the opportunity and get ahead of the curve; to improve profitability and manage their reputational risks. This can be achieved by developing collaborative relationships through and around social media, and by policy development between firms and the regulator; between IT, marketing, compliance and the C-suite; and between companies and their customers.
The initiative I founded, called the Social Media Charter, has encouraged this in the UK, bringing businesses and regulators together to increase understanding and dialogue. We have developed guidance, training, benchmarking and, for the really committed, an integrated implementation process that will ensure companies can engage online in a compliant and safe manner.
As more customers turn to social media to inform their choice of financial product, and to voice their concerns, this initiative provides a safe way to ensure your company is using social media effectively.
This year marks a new chapter. Now all financial companies in London are talking about social media, but the business case is still being proven. Too often, social media sits with the digital experts rather than the senior business leaders. It's time for that to change.
The chance to innovate has genuinely arrived. No longer can regulation be used as a reason for fear of social media, instead with clear boundaries, the most successful firms will be the ones that harness this platform. We are sure to see more innovation in the next five years than has occurred in the last 20.
This post is part of a series produced by The Huffington Post and The World Economic Forum to mark the Forum's Annual Meeting 2015 (in Davos-Klosters, Switzerland, Jan. 21-24). The Forum's Young Global Leaders community comprises extraordinary individuals between the ages of 30 and 40 who are united in a common commitment to shaping the global future. Read all the posts in the series here.