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Banks Are Creating a New Kind of Customer Intimacy With Web 2.0 and Social Networking

Banks increasingly are tapping into Web 2.0, including social networking sites, like Facebook and Myspace, to connect with young consumers in the ways they connect with each other.

Cassie is my friend. Cassie is 22. She likes snowboarding, "Grey's Anatomy" and Gwen Stefani. Someday, she wants kids. But right now she's busy with college. Cassie lives in a place called Stagecoach Island, and she's only my friend on MySpace.

What's Stagecoach Island? Well, Cassie explains it best. "It's an interactive game that promotes social networking, financial education and most importantly -- fun!" Cassie writes on her MySpace profile.

You'll have to scroll down below her profile (www.myspace.com/stagecoachisland) to the site's disclaimer to learn that megabank Wells Fargo ($540 billion in assets) is Cassie's and Stagecoach Island's creator. Cassie, and the virtual world in which she lives, are both part of the bank's radical social networking strategy.

Web 2.0 (see sidebar, page 36, for Web 2.0 glossary) and social networking are taking the world by storm, and the banking industry is beginning to get in on the game. Realizing that the way people communicate today is vastly different than ever before, several banks have begun formulating their own strategies to attract the younger generation of consumers. According to Gartner, by 2012, 75 percent of banks will use Web 2.0 technologies in retail delivery, and social networking technologies will drive lucrative customer relationships.

"Social media is a very targeted approach," says Tim Collins, SVP of experiential marketing at San Francisco-based Wells Fargo. "There are what we describe as 'interested communities' -- it could be anything from people who are focusing on what to do in their retirement, which obviously would skew a little older, to what concerts they may want to see this weekend, and that might skew a little younger. Each one of them is a very targeted endeavor, so there is not any broad audience."

Wells Fargo entered the social media game when it launched Stagecoach Island in May 2005. According to Collins, the bank's social media strategy has evolved from there. "We saw a lot of reaction to it and a lot of comments and blog posts -- a lot of the reaction came from social media circles. That was kind of a surprise to us," he says. "So we started paying attention more to the blogosphere. We started reading blogs on a regular basis. We started to get more comfortable with social media and rolled out our first blog in March 2006 with 'Guided by History.'" With some experience in the blogosphere, Collins adds, the bank rolled out several more blogs, including "Student LoanDown" and a Stagecoach Island blog.

Social Networking is geared to Generation Y and the Millennials. While these generations may not have as much money as baby boomers or even Gen Xers, they are perhaps the group with the most potential because they have little or no established relationships with financial institutions, points out Janet Barkwell, VP of client strategies for Toronto-based RBC (US$539 billion in assets). "This particular demographic is going to experience more financial firsts now than at any other point in their lives," she explains.

Building a Virtual Connection>

But this generation is technology-driven in a way that no other generation has been. According to Yankee Group, 72 percent of teens actively log on to social networking sites. They meet friends on MySpace and Facebook; communicate by e-mail, mobile phone and text messages; and get their information from Web sites such as Wikipedia. To market to them, experts agree, you have to go to those virtual places where they congregate and communicate with them the same way they communicate with each other.

"What we are doing is reaching students where they learn, where they work, where they play and where they live," RBC's Barkwell says. "Students told us that if we actually want to have discussions where they are, then we've got to be where they are, and that definitely includes the virtual world."

Anita Sands heads up RBC's innovation and process design team, which works in close partnership with the lines of business. "We're looking to innovate across the entire enterprise," she says. "We use these technologies -- not just Web 2.0, [but also] any emerging technology -- as a way to connect what's possible out there to what's valuable to our clients. We are not interested in innovation for innovation's sake."

RBC's social media strategy comprises a large online presence, including podcasts, blogs, a Facebook page and RBC p2p, the flagship of the bank's social networking strategy. RBC p2p (www.rbcp2p.com) is an online forum for college and university students that went live at the end of August. Students drive the content on the site, whose tagline is, "Not Your Parents' Banking Site."

"We are in the process right now of hiring six post-secondary bloggers to represent the interest of their peers, and they are going to lead the discussions, blog about their own banking experiences, and share information and solutions about money matters," Barkwell relates. "It's an outlet for students to speak honestly about their financial struggles, their experiences -- good and bad -- with peers who can share relevant solutions."

"We recognize that peers are already going to each other for financial advice," adds Sands. "All we are doing is facilitating that and providing the enabling technology to allow that to happen in a way that resonates with them."

RBC already has hired the leader of its p2p blogging team, Michel Savoie, a bilingual francophone who will serve as the site's host. Canadian college students can enter a contest for the six remaining positions by submitting a video audition on p2p. Finalists will be selected via an online vote.

Making Banking Cool

While on the frontier of the social-media-as-business-tool movement, RBC isn't the only bank pursuing the strategy. The Toronto-Dominion Bank (TD Bank; US$413 billion in assets) also has turned to social networking to build relationships with coming-of-age banking customers.

"Generally speaking, banks are not interesting to 18- to 24-year-olds," says Su McVey, VP for customer segments and strategy at the Toronto-based financial organization. "We wanted to associate ourselves with other brands that are perceived as 'cool.'"

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