When it comes to social media, some bank executives think smaller is better.

Twitter, blogs, chat rooms, Facebook and many other services are designed to foster communication and generate online conversations. Banks have been trying for years to harness these evolving formats.

Some recent, high-profile examples have shown that it is relatively easy for banks to send out messages to the whole world. What is unclear, however, is how effective these messages are: Do they lead to a series of useful interactions or just create more online noise? Executives say that narrowly focused services may be more effective at reaching specific customer groups.

The staff of the global financial cooperative Swift tweeted through its annual Sibos conference last month, using Twitter Inc.'s microblogging service to deliver short updates about the event to participants.

Andrew Carrier, Swift's head of marketing communications for banking markets, said the Twitter feed attracted 928 followers and Swift employees produced 440 tweets — recipients generated many more in response.

But Carrier said Swift's experience demonstrated both the potential and the limitations of social media. The value comes from triggering interactions.

"That, to me, is the wonderful power of social media: user-generated content," he said. "You get people involved in a discussion around your subject matter."

However, the open nature of Twitter also proved limiting because the feed was aimed largely at exhibitors, reporters and analysts and consisted mainly of nuts-and-bolts details about the Hong Kong conference — updated on schedules, for example — rather than information about the high-level payments issues being discussed or how financial companies could put these ideas into practice.

"People are not necessarily comfortable sharing their ideas in such an open forum," Carrier said. "Banks are not necessarily very comfortable yet with the technology."

But Swift has been more successful at encouraging financial executives to interact online through Swiftcommunity.net, a quasi-private networking site that the cooperative — formally the Society for Worldwide Interbank Financial Telecommunication — introduced at the 2007 Sibos conference, Carrier said.

"It was designed from the outset as a social media site," he said. "As a result, it's a lot more involving."

The community site, with its collection of blogs, message boards and automated e-mail updates, has attracted 11,800 registered users and now incorporates 200 communities, Carrier said.

Of these, 40 are public to anyone on the Internet, he said. By contrast, the site includes 120 private communities set up for users with a specific business purpose, even one bank setting up a Swift connection with another. The remaining 40 sites operate on a hybrid model, private but visible, where anyone can view the message boards but can participate only after being admitted to membership.

Swiftcommunity.net has emerged as a destination where bankers can raise important issues with their peers, especially technical discussions of payments policies and other Swift-related issues, Carrier said. "We have an ambition to make it a place where higher-level industry issues are discussed."

Stessa Cohen, a research director at Gartner Inc., said bankers are simply being prudent in using closed communities.

"It reflects the cautiousness that bankers have about discussing banking issues in a public way," she said.

Especially for those who are just entering social media, the limited approach gives users a way to develop a degree of comfort with the medium, she said. "If it's not comfortable, the conversation will be stilted, and nobody will participate. That's not good."

Success also requires buy-in from top management and a recognition that social media will become a more important forum for bankers, she said. "There has to be support in the organization for this kind of communication, even in a closed community."

Banks also need to walk a narrow path to incorporate social media while maintaining the appropriate bankerly reserve in a raucous media environment.

"I haven't met anybody yet who has worked out all the rules of this new turf," said Gary E. Greenwald, the chief innovation officer in Citigroup Inc.'s global transaction services unit.

Citi is adding a video channel to its cash management portal, CitiDirect BE (for "banking evolution"), where the New York company's subject matter experts can post video commentaries, Greenwald said. And although the technology platform lets viewers post their own responses, Citi is rolling out the video feature initially without provision for comments, Greenwald said.

"I want to be very buttoned-down regarding the provenance of information from someone who is commenting on a video," he said. "We have to make sure we're covered on privacy issues and cross-border issues."

The situation with social media today is similar to that with instant messaging a decade ago, when a new communications technology was running ahead of policy and compliance, Greenwald said, making a prudent approach appropriate. "As a bank," he said, "we're going through it very methodically to be sure we're covering all our issues."

Diving into new online communication formats requires banks to pay attention to new risks, said Ed Terpening, a vice president at Wells Fargo & Co. and its manager of social media. The San Francisco company is a veritable veteran of social media, having started its first blog, "Guided by History," four years ago. And even on such a relatively innocuous topic, largely the company's history, the blog's links to outside sites are all accompanied by a Wells Fargo disclaimer.

Bankers who get involved in social media must contend with the customary issues regarding customer privacy and data security, Terpening said, but they also must be aware of laws such as Coppa, the Children's Online Privacy Protection Act, which covers data collection from children younger than 13.

"Every blog post that is published goes through a compliance check," he said.

The trade group Independent Community Bankers of Minnesota has been working since February with the compliance technology vendor Continuity Engine LLC in New Haven, Conn., which operates a social networking platform as part of its online service.

Marshall MacKay, the association's president and chief executive, said the site has attracted 45 participants out of 250 association members.

The online community is simply part of the networking function of the organization, MacKay said. "Going from face-to-face meetings to electronic networking was a natural progression."

The online community operates as a closed network for association members, said Doug Krukowski, the trade group's chief operating officer. The forums initially serve operations and information technology staff, with discussions of issues like core processing, item processing, fraud and e-banking.

The members tackle issues like developing a policy for vendor management, he said. "This is for bankers sharing among themselves, versus the Facebook or Twitter approach, where it's wide open to the world."

This story has been reprinted with permission from American Banker.

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