Tag Archives: Capital One

Banks are slow to develop a social media presence

As social media usage has achieved critical mass, many businesses have begun to incorporate social media into their marketing, sales, customer service and other activities.  However, many of the leading U.S. banks have yet to establish a comprehensive social media presence.  This is due to a number of factors, including privacy and security concerns, as well as established organizational structures and processes that can be hostile to new ways of doing business.

A topline scan of the websites of the top 20 U.S. consumer banks (based on their consumer loan portfolios) shows that:

  • Some leading banks have no discernible social media presence
  • Many banks have developed Facebook and Twitter pages, but operate these in a reactive mode (i.e., do not run initiatives to drive traffic to these sites).
  • Some of the banks are much more proactive, driving large volumes of traffic to the social media pages with advertising, contests, forums, etc.  These typically include banks that lack any retail branch presence (e.g., American Express and Discover), or banks like Capital One whose retail presence is dwarfed by its national lending operations.
  • Some of the other banks do appear to have a social media vision.  For example, SunTrust has extended its “Live Solid. Bank Solid” tagline into the socialsphere.  Wells Fargo has developed multiple Facebook, Twitter and Blog pages to cover different audiences or areas of interest.

For banks to fully leverage the potential of social media, they need to:

  • Get top management buy-in and support
  • Assign an executive to own the social media function at the bank
  • Incorporate social media into marketing, sales, customer service, and HR structures, strategies and initiatives
  • Gather and incorporate feedback from customers and employees into social media initiatives; track the performance of these social media initiatives

Volumes for Leading Card Issuers Are Recovering

In their most recent quarterly financials, the leading U.S. credit card issuers continued to show improvement in spending volumes. Credit card volumes were significantly hit in 2009, as consumers pulled back on discretionary spending, and as credit card issuers retrenched and reduced account numbers.

The following chart shows that most leading issuers returned to year-on-year growth in credit card volume in 2010, and that the rate of growth has steadily improved.

The reasons for the recent improvement in card volume are:

  • Overall economic recovery, with corresponding growth in consumer spending
  • Issuers’ promotion of card spending as a source of revenue, in particular as outstandings growth has been largely absent

A number of card issuers recently predicted that card outstandings should grow in the second half of 2011, but we expect that issuers will continue to push card volume, and aim for a good balance between spending and lending.

Financial marketing spend continues to recover

Third-quarter financial data released by the large U.S. banks this week pointed to the continuation of a trend observed in the previous quarter: year-on-year growth in marketing spend. Marketing represents a leading indicator for banks, as it is one of the first expense categories to be hit at the start of a downturn. The corollary is that an increase in marketing spend is indicative of banks’ expectation that economic conditions are improving.

The following are changes in marketing spend for leading financial institutions between 3Q09 and 3Q10 (quarterly changes are not generally regarded as reliable, due to seasonal factors):

  • Huntington: +152%
  • Capital One: +140%
  • American Express: +68%
  • Discover: +68%
  • Chase: +48%
  • PNC: +40%
  • SunTrust: + 13%
  • Key: +11%
  • Wells Fargo: +6%
  • Bank of America: +6%
  • U.S. Bank: -21% (although note that U.S. Bank 3Q09 marketing spend was much higher than usual, due to the launch of a number of marketing initiatives)