Pub. 2 2014 Issue 4

fall 2014 13 As with most emerging technologies, the key to mitigating risk and encouraging customer adoption is communication. “From both our client work and our research, it’s clear banks are addressing security as one of their top priorities with current and emerging technologies. They are ahead of the curve on informa- tion and data security,” said Reed. “The communication of that to consumers is what’s key.” Competing in the Social Media Arena The newest (and potentially most import- ant) channel of communication between businesses – including banks – and their customers is social media. “Banks need to realize and accept the inevitable; social media is here to stay,” said Nelson. As powerful as a well-executed social media strategy can be, it also carries a lot of risk for banks. No matter what platform or strategy the bank is using, it has to take regulatory risk into account, according to Vonder Heide. “The first thing the bank needs to do in today’s environment is recognize that they’re different because they’re a regulated entity,” he said. So, what can banks do to mitigate the risks associated with social media (which includes inadvertent communication of privileged information by staff and by customers)? According to Reed, there are two primary aspects of social media that banks need to address: customer usage and employee usage. The bank’s strategy for addressing each source of risk must coincide with the overall social media strategy. “You need to decide at the board level what your objective is,” said Vonder Heide. “Is it getting new accounts? Serving the community better? Put an ac- tion plan in place that will help you reach those objectives.” Social media risk from customers can be partially mitigated through consistent, frequent communication, as with most customer-driven security. Risk from staff actions is a more complex issue. Most banks choose one of two approaches. First is creating a strict policy for em- ployee use of social media and adapting it over time as the social media landscape evolves. The second approach is a more reactive position, Reed explained. “These banks are leveraging current employee communications policies to cover the use of social media, similar to how the banking industry approached email when it first appeared,” he said. Nelson advises banks to ensure that employees who are responsible for social media are equipped for success (both in marketing and regulatory compli- ance). “Empower them and give them the tools they need to get the job done,” he said. “Have the process in place to respond well to a variety of situations. Social media is going to keep changing and you have to put people in place to take advantage of it.” Whichever risk management strategy the bank chooses, defining success is a commonly missed component. “The biggest thing banks are lacking in social media today is the ability to quantify their results,” said Vonder Heide. “Know how you’re going to measure success.” Change is Here to Stay Despite the risks emerging technologies present to financial institutions, the industry as a whole is well prepared to adapt. “Banks are in a good position to really leverage technology,” said Reed. “Some banks are doing it very well, put- ting their customers first when it comes to getting the right customer into the right channel for their use of banking services – what I call ‘right channeling’.” That’s a good thing, because new channels and new services that rely on technology are most definitely on the way. Technology has been developing exponentially for the past two or three decades, and it isn’t showing any signs of slowing down. Every industry needs to adapt in order to thrive in this changing environment, and banking is no exception. “Banks must offer emerging technologies to survive,” Vonder Heide said, “but it’s incumbent upon them to make sure they take steps to protect shareholders from losses.” That responsibility means that bank boards must maintain their understanding of how technology impacts their institution. “If you accept the responsibility of being a director of a bank, one of the conditions is to have a personal understanding of how technology works and the impact of the tech decisions they make,” said Vonder Heide. n Seitz is Communications Coordinator with the Wisconsin Bankers Association. This article was originally published in the August 2014 issue of the WBA’s monthly publication Wisconsin Banker.