from BAI OnLine Banking Strategies, OCTOBER 25, 2006

“Social networking” is beginning to enter the vocabulary of bankers as a number of prominent institutions experiment with posting their messages on Web sites such as Facebook, MySpace and YouTube.

These social networking sites enable users to establish interactive pages with Web logs, discuss their projects and interests or—particularly in the case of YouTube—post video that they’ve created or that they enjoy. The sites have emerged as online social hot spots for users.

Banks such as JPMorgan Chase & Co., ING Direct and Wells Fargo and Co. have also discovered that these sites offer an attractive venue for promoting their products and services.

Chase, for example, uses Facebook—a site popular with students—to promote its credit card for college students. In August, the New York-based bank announced a one-year marketing deal to promote its “+1” card through its own area within the Facebook site.

“Facebook is a virtual campus of 5 million students,” says Kathy Witsil, senior vice president for Chase Card Services, which operates out of Wilmington, Del. Additionally, Facebook offers the bank instant feedback and interactivity with student customers, Witsil said.

Facebook users can earn “Karma points” by making purchases at certain stores and even getting friends to sign up for a Chase credit card, Witsil says. They can pool these points with friends, give them away, or redeem them for rewards from Chase that appeal to this segment, such as a Twister game or a 12-pack of EasyMac.

Currently known for its online savings account, ING Direct launched a campaign in September to generate more interest in its mortgage offering.

The backbone of the campaign is the company’s MoveOutMoveUp.com Web site, which targets first-time home buyers with humorous video clips and games. The video clips have circulated the Internet and been featured on YouTube, gaining more exposure for ING’s products.

John Owens, head of marketing for ING Direct, says that the campaign helps the bank compensate for its lack of a branch network through “word of mouth” marketing. Owens says that more than 40% of ING’s business comes from referrals. Being featured on a third-party Web site, much like getting praise from a popular blogger, is “perceived as a third-party endorsement,” he adds.

Wells Fargo launched two blogs this year in effort to engage with online customers. The first, Guided by History, was started in March 2006—just before the 100th anniversary of the 1906 earthquake that leveled the bank’s headquarters city of San Francisco. It includes personal accounts from the quake, historical anecdotes and information about how families can prepare for disasters.

The site was supposed to have a limited run, says Tim Collins, senior vice president of experiential marketing for Wells. But “readership continued to increase even a month or so after the anniversary of the quake,” so the bank still maintains it, he says.

In September, Wells launched its “Student LoanDown” blog, which includes first-person stories on student loan experiences, information about tuition rates and financial aid, and other advice and resources relevant to students. Collins says these blogs are important to the marketing of the bank as a whole and in creating a deeper bond with customers.

“I can’t say financial services companies have the warmest and fuzziest image with consumers,” Collins says. “This makes it more of a conversation. We hope to make the bank more approachable, more human; it’s not just about the marketing message.”

For Wells’ venture into social networking for young adults, known as “Stagecoach Island,” see “Virtual Role-Playing in Finances” in the August 2, 2006 issue of BAI's Banking Strategies Retail Delivery Insights.

Social networks have grown exponentially in recent years. YouTube, for example, draws 20 million unique visitors per month and adds more than 65,000 videos per day, according to Rod Nelsestuen, a senior analyst in the cross-industry practice at Boston-based TowerGroup Inc. Google Inc. found the business model so appealing that it acquired YouTube earlier this month for $1.65 billion.

Nelsestuen said these sites can provide an avenue for banks to connect with younger consumers. “This could start to change the banks’ image so they’re not seen as so square,” he said.