Last week’s Net.Finance conference entitled Online Innovations in Financial Services Marketing brought thought leaders together in New York to examine trends and breakthroughs in the world of banking.

For me, there was one clear take away: The new social tools that allow people to connect with each other online are ushering in a new economy.

We are moving into a social economy, where collaboration and participation between and among consumers will sway their choices more than marketing messages do. Those companies that enable social participation, add value to people’s lives and create authentic experiences for their customers will lead in this new economy. There were other topics discussed, but this theme kept creeping into the presentations and conversations in a way I had never before encountered. I’m going to narrow in on this one theme, which ran throughout the two days of the conference, and I apologize to those companies and speakers I’m not highlighting here.

Jurie Pieterse – ING Direct
Jurie outlined several of the key ways that ING is handling the power of its marketing and messaging to consumers by opening up its brand to customer participation. It is clear from ING’s early experimentation that it has a brand with strong emotional appeal and resonance. The bank opens the doors to people who engage with the brand to create photos, videos and prose about how their relationship with ING helps them manage their money.

Jurie explained that when they delivered the prizes in their user-generated content contests, which ranged from $1,000 to $15,000, most winners said that they entered the contests more from a sense of fun and participation than for the money. After this initial experimenting, ING will begin to examine the data to determine if these contest entrants are more loyal and profitable than less engaged customers. I would bet my Electric Orange account they are.

Chris Larsen – Prosper
It is fascinating to watch Prosper evolve their model. Chris spoke at length about the importance of social capital to improving its default rates. The idea is that people who have peer pressure built into their borrowing habits will pay back at a better rate than they do to traditional financial institutions.

Prosper has found that people who receive at least one of bid from friends or family have significantly lower default rates than those who only borrow from strangers. By leveraging this social capital, the entire community acts more honestly, even if lending to friends and family is a small part of the overall equation.

Jason Knight – Wesabe
Jason sees Wesabe as a community of interest focused on money. By allowing members to tag their financial transactions and share whatever information they choose with the greater community, they create a collective intelligence I find very exciting. I see them as the long tail of financial advice. People discuss better ways to use their money, from smarter investing habits to buying better cuts of meat. All of this collective intelligence fuels a social economy where people rule their situation by having a much healthier relationship to the way they spend their money.

Shari Storm – Verity Credit Union
Shari oversaw the creation of the first “bank” blog, which Verity started in 2004. She has strong information and advice to other FIs considering jumping into the world of blogging. It is clear that the blog is an excellent way to humanize the company and engage with their community in an honest and transparent way.

Thomas A. Desmond – TradeKing
I was blown away by TradeKing, a company I had not heard of before. Their marriage of social tools inseparable from their trading platform is perhaps the very best example of social media being used strategically by a company that I have seen.

They have baked community aspects into everything that happens on their site, so, if traders opt in to the community, they can learn from each other based on their actual trading results (similar to Zecco.com, below)

Asheesh Advani – Virgin Money
It took me a minute to wrap my head around Virgin Money’s model, but once I got it, I was hooked. Many people who buy houses get side loans from friends and family to make a bigger downpayment. Same with student loans, or with unsecured personal or business loans. Virgin creates a model around this kind of lending, so both sides can take advantage of the tax benefits available via a documented lending relationship. It creates excellent flexibility, because if a borrower needs to skip payments, the lender can adjust the loan accordingly. The loan can always be turned into a gift at a later date. This takes a part of the social economy which was underground and unseen, and brings it above board, recognizing it as an important part of the overall economy.

Gabriel Dalporto – Zecco.com
Zecco and TradeKing's models have many similarities (one exception being that Zecco offers 10 free trades each month). Community features are built right into the tools making it easy to track individual investors within the community. That allows the higher performers to gain a following and for newcomers to learn from the veterans. Like TradeKing, Zecco allows community menbers to see the actual trading results and portfolio holding of members (that have opted in), adding an enormous amount of credibilty to discussions about individual stocks and trading strategies.

Summary
It feels more and more to me that we’re at a turning point. I admit that these innovations are small, just barely bubbling up to the surface. But I believe these examples of companies quietly tapping into unmet needs provide a model of the future.

Anyone working at a financial institution who wants to understand the potential opportunities and threats coming our way should watch these companies and understand their models. If my experience is any indication, the social economy will begin to trickle into your FI's strategies and executive discussions and those who best understand these concepts can help inform, influence and shape the outcome.

William Azaroff is the Interactive Marketing & Channel Manager at Vancity where he develops interactive marketing initiatives, and pioneered ChangeEverything.ca, the groundbreaking change-themed online community. William builds on a decade of experience at digital agencies in Vancouver, Seattle and Los Angeles driving strategy, extending brands to the Web and building relationships for companies in several verticals, including Honda, Disney, Intuit Canada and the Government of BC. He discusses trends and noteworthy achievements in social media at his blog: azaroff.com/blog.

For someone whose job it is to stay on top of innovations in financial services, I hate to admit I'm late to the party on the so-called "reward checking" phenomena. Last year, I'd noticed a number of smaller financial institutions launching high-yield checking accounts, but I hadn't realized it was a national trend primarily powered by a single bank tech supplier, Austin, Texas-based BancVue (see note 1).

According to a November BankRate article, more than 350 U.S. banks and credit unions now offer so-called "reward checking accounts" powered by BancVue with 30 new ones coming on board each month. These checking accounts usually pay high rates of interest, typically 6%, if users meet high levels of electronic banking activity each month.

Typical requirements to earn the high yield:

• 10 to 12 debit card transactions each month
• Electronic statements (no paper)
• Online banking usage

Typically, the following benefits are paid ONLY when the above requirements are met:

• 5% to 6% interest on the first $25,000 to $40,000 in balances
• ATM refunds up to $10 to $15/mo

And most seem to include:

• No monthly fees regardless of activity or balance levels, so the account can be marketed as "free"

Marketing
Another distinguishing characteristic of these accounts is the innovative marketing and website design. With the help of BancVue, smaller banks and credit unions are able to offer a level of design and pizzazz that meets or exceeds the typical megabank high-budget program.

Here are some of the more interesting BancVue-powered programs we've looked at (screenshots follow):

• Velocity Checking <velocitychecking.com> from Seattle's Verity Credit Union
  Earn 6.01% on balances up to $40,000 and receive ATM refunds up to $25 when meeting the following monthly requirements:
  - 12 debit transactions
  - 1 online banking login
  - electronic statement in lieu of paper
  
• Turbo Checking <turbochecking.com> from New Mexico's Charter Bank
  Earn 6.01% on balances up to $25,000 and ATM refunds when meeting the following monthly requirements:
  - 10 debit transactions
  - receipt of 1 direct payroll deposit or other automated ACH deposit
  - 1 login to online banking
  - electronic statement in lieu of paper

And our favorite, which substitutes iTunes downloads for the high-yield benefit:

• FreeTunes Checking <freetuneschecking.com> from Oregon Community Credit Union (see note 2)
  Earns 4 free iTunes downloads each month provided the following are met:
  - 12 debit transactions
  - 1 login to online banking
  - electronic statement in lieu of paper

Screenshots

Velocity Checking from Verity Credit Union

Turbo Checking from Charter Bank

FreeTunes Checking from Oregon Community Credit Union

Notes:

1. I began researching this area after reading Verity Credit Union CMO Shari Storm's recent blog post (here) about how she'd changed her payments behavior to make the 12 monthly debits required for its Velocity Checking.

2. Oregon Community Credit Union also offers a high-yield version, Remarkable Checking, that substitutes a 5.05% APY on all checking account balances instead of the free music. Monthly account requirements are the same. 

Note: Read part 1 and part 2.

Many articles and blog posts will tell you that the cost to enter into the world of blogs, wikis, RSS, podcasts, social networking (Facebook or MySpace), social bookmarking (del.icio.us or ma.gnolia), or  Application Programming Interfaces (or APIs) mean that you can start a blog or social media project for your bank or credit union at a total cost of zero. Right?

Well, sort of.

One of the critical, but often unsung factors of success of a social media project is the resourcing. If you're going to invite the public to play, make sure you have someone who can help create the kind of community you want.

As we planned ChangeEverything.ca at Vancity we had many discussions about how to create a vibrant and postive community. We have all seen online bulletin boards, discussion forums and blogs degenerate into the kind of name-calling no one wants associated with their brand. This was one of our worst fears. Since then, we've learned a great deal about community building.

In my first part of this post, I mentioned nine success factors for a social media project. An important one is hiring someone who knows how to nurture and grow an online community. Here's why.

Whether or not hard dollars are spent launching a social media project, someone needs to manage the initiative and ensure that it achieves its goals. This is a very specific skill-set with the following requirements:

• Someone who can inspire visitors to come back, readers to register, and registered users to add good content.
  
• Someone who knows when to get involved in discussions and threads that are degenerating, going off topic, or just going nowhere.
  
• Someone who can elevate good material to the homepage so it will hook like-minded people, as well as delete remarks you don't want on the site.
  
• Someone with good taste.
  
• Someone who understands the business goals of the site and can act appropriately and decisively.

Recently I have seen a few interesting posts speaking to the issue of good online community moderation. One was on Jeremiah Owyang's excellent web-strategist.com: For the Community Managers. I also saw a very good piece on Seth Godin's blog: Jobs of the future, #1: Online Community Organizer. So it seems that more and more people are catching on that this free revolution has some resourcing costs built in if you want to achieve success.

Here are three examples of financial institutions that blog and how they manage their resourcing.

Wells Fargo

Wells Fargo has a total of four blogs, the most for any financial institution. According to their VP of Social Media, the amazing Ed Terpening:

Although we have an Experiential Marketing group dedicated to social media activities for Wells Fargo, all of our bloggers are team members who have other full time jobs. They add blogging - writing, posting, reading, replying - on top of those jobs, and our lead bloggers take a more active role than others. The culture of blogging is unique and we strive to connect with that culture through many different voices at Wells Fargo. Finding the person with the right passion + knowledge is our goal, whether they have a professional communications role or not (most do not).

Verity Credit Union



Verity was the first financial institutions to blog, beginning in late 2004. It recently received an excellent facelift and functional overhaul. It's a highly usable and readable blog. According to their CMO and VP Shari Storm, they staff their blog with volunteer employees from around the credit union. Employees who want to blog go through a quick 10-15 minute training on the dos and don'ts of blogging, and they are allowed to spend no more than an hour a month blogging so their managers won't get upset with the project. This is a nice way to save money on resources. Until their recent overhaul, their blog was even hosted for free at Blogger. Says Storm, "One of the unexpected successes of our blog is how much employees like writing for the forum. We’ve heard from employees that it provides extra job satisfaction and a sense of employee pride."

Vancity



One of the key success factors of ChangeEverything.ca was the investment in a full-time Online Community Moderator, Kate. Kate has been instrumental in nurturing the community, providing them with contests and activities, connecting the site to the press to get earned media exposure, moderating comments and understanding the needs and wants of the site's registered users. Not an easy job, and I always say that Kate is one of the key reasons why the site has grown and excelled in the way it has. She has an amazing balance of clearly knowing the purpose of the site, and also being open to where the community wants to go. She deserves amazing credit and her skillset will only make her more and more valuable. (NOTE: no poaching!)

So, by all means try out social media. There are many low-cost, even free, options. But realize  that for a site to achieve longevity and success as a communications vehicle, branding tool, community platform, or whatever you have planned, you may need to invest in social media management. This means either tapping good people internally to devote time to the project or hiring a community moderator to ensure your project develops to its full potential.

William Azaroff is the Interactive Marketing & Channel Manager at Vancity where he develops interactive marketing initiatives, and pioneered ChangeEverything.ca, the groundbreaking change-themed online community. William also plans strategy for the online channel, with a view to its potential to help Vancity, its members and the community. William brings nine years of experience in Vancouver, Seattle and Los Angeles producing web projects for such clients as Honda, Disney, Intuit Canada and Nike Jordan. He writes about the intersection of online branding, social media and the world of banking on his blog at azaroff.com/blog

Seattle's Verity CU, the first financial institution in the world with an external company blog, is replacing its aging Blogger version, in use since the December 2004 launch.

Verity posted a clever "farewell" in its old blog on May 11 (see screenshot below) and promised a link to the new version "soon." A week later, the new blog is live, and you'll want to take a look at it <blog.veritycu.com> (screenshot below).   

 The new site is pleasing to look at, easy to follow, and state-of-the-art in just about every way, exactly what you'd expect from Trabian, the red-hot social media design firm. I especially like the middle column which showcases  recent blog postings by department: marketing, member services, executive, HR, IT, accounting, and business services. It helps expose more great posts, while demonstrating to members that the blog is a true company-wide effort. Each department's posts can also be accessed through the Categories area in the lower-right.

I give it the first A+ of the year. Excellent work!

New

Old

It's quite likely that energy consumption and environmental issues will grow in importance over the remainder of this decade and well into the next one. Financial institutions can play a positive role in promoting environmental causes both by their actions, such as Vancity's pledge to be carbon neutral by 2010, and by offering products that reduce paper consumption, such as eStatements and electronic payments (note 1). 

Seattle's Verity Credit Union <veritycu.com> demonstrates another approach: offering an environmentally friendly premium for home equity applicants. The free compact fluorescent light bulbs are relatively low-cost but have a lasting value to the customer. Finally, the credit union wraps it all up neatly with a tie-in to the upcoming Earth Day (see homepage screenshot below and note 2).

Notes:

1. Because saving paper also saves the bank money, be just a bit careful that you don't come off as overly self-serving when promoting estatement options. Passing on some of the savings to the end-user and/or donating a portion of the savings to a good cause, could ease any criticism you might get.

2. The Earth Day promotion was one of five promotions offered in the main ad box, accessed via a Seattle IP address at 4 PM April 20, 2007.   

Since I'm a numbers junkie, whenever I'm at a conference, I try to note as many meaningful statistics as possible. By meaningful, I mean a number that provides an outsider with some insight into the business. Merely saying, "we beat our expectations by 63%" does NOT qualify, unless the speaker also shared their expectations. 

The flow of numbers was about a bit below average during the three days I attended Net.Finance, but the two professional researchers on the agenda, Jim Van Dyke of Javelin Strategy and Asaf Buchner of Jupiter Research, delivered slides chock full of statistics. I will check with them to see if they are willing to share with our readers. 

Here's some of the nuggets buried in the presentations from the other experts on stage: 

Most Eye-Opening Stat: 

• During the past 14 months, more than 280,000 messages have been posted on the Prosper.com discussion forum, according to CEO Chris Larsen (see here for Colin Henderson's complete notes on this session).
  
  My take: That's an amazing level of consumer engagement with the new lending platform. To put that in perspective, Wells Fargo's Student Loandown blog has received 98 total comments during its eight months online.

Best Stat to Drop in a Business Case:

• Shari Storm, CMO, Verity Credit Union, said that 1% of its new members named the blog when asked how they heard about Verity; the new members had an average of 2.7 accounts with $9,000 in deposits and $11,500 in loans (excluding mortgage); furthermore, the CU's blog, launched in Dec. 2004, now has 1,000 readers (see here for Colin Henderson's complete notes on this session)
  
  My take: While I don't recommend trying to turn this single data point into an ROI calculation, it's the first time I've heard a financial exec say something about blogging that the finance folks will appreciate (chalk up another first for Verity).

Stat that Most Contradicts My Previous Position:

• Vancity's ChangeEverything.ca blog, launched commercially in Sept 2006, now has 1,000 registered users who've generated more than 2,000 blog entries and comments; in total, the site has had 45,000 unique visitors according to William Azaroff, Interactive Marketing Manager (see here for Colin Henderson's complete notes on this session)
  
  My take: Despite my reservations about whether it would gain traction without a financial services perspective (see our Online Banking Report on Bank 2.0 here), Vancity's unique blog has gained a small, but growing, worldwide following, and, more importantly, has contributed measurably to Vancity's efforts to help its community and create positive brand positioning for the CU. Nice work.  

Blogging/Podcasting:

• Key Bank's most popular podcast, top stock picks by John Caldwell, has recorded 70,000 visits and 12,000 unique users, according to Interactive Marketing Manager Mickey Mencin
• Colin Henderson, BankWatch blogger and former BMO exec, mentioned that 39% of Canadians are now reading blogs 

Online Marketing:

• Colin Henderson also cited Forrester findings that 50% of recent financial buyers did 100% of their research online; 30% performed both on- and offline research; and just 20% conducted all the research offline. In Citibank's late 2005 new checking account promotion, the bank gave away 275,000 iPods, according to Charles DeFelice, SVP customer information environment (it wasn't specified if this was the POTENTIAL or ACTUAL number given away, since consumers had to follow through with a number of electronic activities over a period of months in order to qualify for the freebie) 
• Jon Kaplan, head of Google's financial services group, said that 60% of Google users have a personalized (Google) page and that 20% of Google search volume originates from these pages
• GE Money's SVP of Strategy Vincenzo Picone said the company has 300 million customers with $190 billion in assets across 54 countries which led to a net profit of $3.5 billion in 2006; the company has 2010 targets for 300 million unique visitors; $20 billion in online originations and 1 billion transactions via the online and mobile channel
• U.K.'s Lloyds TSB experienced a 71% revenue lift (against a control) on its homepage by implementing Touch Clarity's (now Omniture) targeted ad server which uses a number of variables to determine which ads should be shown to an individual visitor; according to Omniture's Brent Hieggelke who showed results from a case study presented by Lloyds TSB at a recent conference

Mobile Banking:

• Jennifer Vos, director of Citi Mobile, Citibank's new mobile banking service, said that one-third of current Citi customers have input mobile phone numbers into the bank's alert system; furthermore, the new mobile offering was piloted by 100 employees, who have recently been joined by another hundred users in the southern California market

Small Business Banking:

• Wells Fargo has 150,000 "very active" small-business online banking users according to Eskander Matta, SVP of internet services group; businesses are making $45 million in payments per month with the bank's DirectPay service launched just a year ago

Branding:

• 94% of ING Direct's customers would recommend it to a friend, according to John Owens, Head of Marketing

Online Banking:

• Customer satisfaction in online banking, while on the rise, still trails online retailing by five percentage points, 78% vs. 83%, according to Larry Freed, CEO Foresee Results

Our sister publication, Online Banking Report, is constantly on the prowl for innovations in online finance. When it finds a new one, it awards the new development an "OBR Best of the Web." During its 12-year history, the newsletter has handed out about 80 such awards (click here for the pre-2006 list). The main criteria for winning is "raising the bar" in online consumer banking, credit/debit cards, payments or lending (see note).

The 2006 winners in chronological order were:

• Prosper (March) for its eBay-like take on
  person-to-person lending (coverage here)
• billQ (August) for its Web 2.0 bill payment
  reminder service (coverage here)
• USAA (November) for the first in-home, remote deposit-capture service (coverage here)
• Wells Fargo (December) for fully embracing
  blogging with the launch of four blogs in 2006
  (coverage here); also, a belated award to Verity Credit Union for being the first to blog in
  December 2004 (coverage here)
• Bank of America (December) for its Yodlee-powered, full-featured online personal
  finance service, MyPortfolio (coverage here)

It was a good year innovation-wise, and we look forward to continued growth in 2007. One prediction: multiple winners in the mobile finance arena. For more information on the top developments of 2006 along with the latest 10-year forecast, see Online Banking Report #137.

Note: Usually, the first company to implement a significant new feature wins the award. And generally there is only one award for each new feature. For instance, Signet Bank was named best of the Web in 1997 when it launched the first triggered-email alert. Then Charter One won the award in 2002 when it took the triggered-alert feature to a whole new level, integrating voice, fax, and email options into a full suite of alerts. Online Banking Report founder and managing editor Jim Bruene makes the final decision. The only way to win the award is by being innovative. There is no nomination process, no deadline, nor any way to influence the decision. 

Update (Nov. 12, 10 AM PST): Twenty-two hours later, the Verity website has been taken offline, but the blog is still running. However, there are no new posts since the original, although Verity's Shari Storm has responded to several member comments. From information in the comments, it sounds like Verity's log-in page was redirected for up to four hours on Saturday morning beginning about 6:00 AM. At least one member said they answered "screening questions" including mother's maiden name.

Seattle-based Verity Credit Union is in the midst of a major website spoof that began earlier today. The credit union is reporting that the log-in function to online banking, located on its homepage (upper-right below), has been redirected by a hacker.

Apparently, only the log-in function was hijacked. The credit union has control of its homepage and plastered a large warning over the front. The link after the warning, "more information," linked to the Verity blog for updates (see below).

It appears the log-in process is back under the credit union's control, although the warning is still there. When attempting to log in at 3:15 PM with a test name (I do not have a Verity account), I was redirected to an error message at <https://secure-veritycu.com/Common/SignOn/SignOnError.asp>, which appears to be a legitimate Verity secure page. There was no follow-up question asking for my credit card number as mentioned in the blog post (see below).

The incident was first posted to their blog at 12:02 PM today (see post below).

The silver lining
As bad as this is, Verity should be applauded for the rapid response, using both its website and blog to get the word out. Presumably, they also emailed customers, but those messages may or may not be believed in this day of rampant phishing.

You can follow the ongoing drama at the Verity blog, where customers have been redirected for the latest news. We'll keep you posted.

Verity CU <veritycu.com>, a large Seattle-based credit union with a field of membership spanning the entire state, has been operating a public blog using Google's Blogger since December 2004 (click on inset for closeup), making it perhaps the oldest-running financial institution blog (let me know if you have one that started prior to Dec. 13, 2004).

Fourteen contributers are listed, more than 10% of the 105-person employee base. Each author has a profile posted online, making it a great way for members to get a better understanding of the behind-the-scenes activity.

Posting activity varies. In recent months, we've seen four or five lengthy entries. This month, there are 17 articles so far. Subject matter varies from the personal ("My trip to the dentist") to more salesy stuff about the credit union.

Comments are open, but little used. There were only two non-employee comments left in August.

The website counter shows 6,613 visitors.

Analysis
Offering a blog is an excellent way to show that you care about customers/members and that you are Web-savvy. We applaud Verity for their pioneering efforts over the past 18 months. But it's time for the CU to upgrade its blog.

1. Improve the design with a masthead, better archive options, and graphic images that link back to the CU. Users expect more than the basic free blogger template from their credit union.
2. Shorten the entries and add graphics and pictures.
3. Keep the postings relevant. It's OK to have the occasional rant about Seattle traffic, but stick to things that matter to the reader. Most come to your financial institution to learn more about your company or your products. Let them go to a million other blogs for entertainment.
4. Highlight the author of each entry. Currently, the Verity author is listed in small, faint type near the bottom of each posting. You want readers to get a sense of the people doing the writing, so it's important they see the name at the top of the posting.
5. Improve the author profile info. Some author-profiles are quite skimpy. If you want credibility, the authors need to fully disclose their role at the credit union.
6. Close the comments. Blog-comment areas are fine if they are used; however, a big ZERO down there just makes it look like you're visiting a ghost blog. If you do use them, make sure they are fully moderated, i.e., no comment goes live until approved by the blog administrator.

Blog address: veritycu.blogspot.com

Normally, we don't pay much attention to radio ads, usually pressing the Seek button as soon as one comes on. But today, a particular ad caught our attention. It was for a 10% APY CD offered by Seattle-based Verity Credit Union (see inset) which accepts any resident of Washington state as a member. The term was 10-months and the maximum deposit was $1000.

While we admit this rate did get our attention, we don't like this tactic for several reasons:

1. Bait-and-switch: Sophisticated depositors know it's a teaser rate; and they will only leave their money on deposit long-enough to grab the $83 interest check. However, it's the less-sophisticated that actually think this might be a real rate, that get sucked in only to be deeply disappointed once rates ratchet back to the standard 3.25% rate.

2. Too expensive: Depositors receive $83 in interest instead of $27, a before-tax difference of $56. We think the credit union would be better off providing a straight $50 incentive for new deposits of $5000+ and/or $25 for $1000+. Not only is this a lower cost for the financial institution, it's more straight-forward for the customer, and could bring in a higher average balance.

3. Too exclusive: Only applies to new members or existing members that convince a non-member to open one of the CDs. Blasting an offer across the airwaves and homepage that applies to new customers only is a sure way to disappoint existing members. Furthermore, the website has no explanation of how to refer a customer or how to take advantage of the referral bonus. As a matter of fact, the website has no more information about the special other than what's shown in the homepage graphic (see inset above). The graphic image is NOT clickable.

4. Cannot apply online: Maybe we're biased, but we strongly believe that red-hot products advertised on the radio and on the middle of the homepage, should have an online application. Verity's promotion directs interested parties to its branches or call center.

--JB