Social media is a powerful and growing communications tool for financial services companies, according to the industry regulator, as it published new guidance on the use of platforms such as Twitter.
The Financial Conduct Authority (FCA) said it recognises the importance of social media but has set guidance to ensure finance firms comply with rules around promotions.
“Financial promotions, whether on social media or traditional media, must give customers the right information and meet our requirements to be fair, clear and not misleading,” said FCA director of supervision and authorisations Tracey McDermott.
After consulting feedback from the industry, the FCA said it has come up with “a sensible approach that allows the industry to innovate using new forms of media and, at the same time, ensures customers get the right level of protection.”
The FCA warned firms that any communications, including those using social media, is capable of being a financial promotion. As a result, it must be “fair, clear and not misleading.”
See the full FCA guidance here.
In August 2014, the FCA advised finance firms about its regulatory stance on social media. It said it had observed an increase in firms’ use of digital media for customer communications and financial promotions, and pointed out that customers must be presented with a certain minimum amount of information, regardless of the media used to send it.
Read more about social media in the finance sector
The FCA noted that firms perceive difficulties, when using character-limited forms of social media such as Twitter, in complying with some of the FCA rules. This includes the financial promotion rule, which states that it must be made clear when a promotion is a promotion.
In its latest guidance, the FCA said firms should consider whether it is appropriate to use character-limited media as a means of promoting complex features of financial products or services.
It may be possible to signpost a product or service with a link to more comprehensive information, provided that the promotion remains compliant in itself, according to the guidance. Alternatively, it may be more appropriate to use image advertising to promote a firm more generally.
The FCA also warned that firms need to ensure promotions are fair, even if they reach a recipient they were not intended for.
The guidance states: “Firms should ensure that their original communication would remain fair, clear and not misleading, even if it ends up in front of a non-intended recipient (through others retweeting on Twitter or sharing on Facebook). One way of managing this risk is the use of software that enables advertisers to target particular groups very precisely."
Social media in the finance sector has matured greatly since the early days. In 2009, at a behind closed-doors meeting of bankers, social media experts and technologists at The Financial Services Club revealed how the sector which traditionally leads technology innovation views social media technology.
The event, held at the Lloyd's building in London, delivered a clear message that banks must embrace social media. But work needs to be done by banks to work out how and where to use it.
Here are some of the comments made back then:
- "Social media is the plumbing of collaboration."
- "Twitter is interesting but I do not know why. It is interesting because people are using it."
- "If you want to adopt social media you need to listen to what people are saying about it by monitoring online discussions."
- "Businesses can facilitate customer services through social media but it is not the answer to everything."
- "Most businesses in this country are one-man bands and most of these are online. They would like to be able to run their businesses online, including dealing with banks and the tax office, for example."
- "Banks will have to get used to the idea that there will be some customers will want to use the web."
- "In 1923 the head of the Post Office said he could not see any uses for a telephone apart form calling servants."
- "Corporates are already monitoring data feeds to see what people are talking about through mechanical scanning of social media feeds."
- "In financial services we are still in the educational phase."
- "There will be a bonus for banks that experiment early with social media."
- "Banks can't experiment because of heavy regulations."
- "Social media is a good way of engaging with employees as well as customers."
- "How does social media transfer to the corporate context is what banks are trying to understand. There has to be a new way found for doing this."
- "I am not certain [banks] are in a position to use social media credible."
- "A lot of it is total bollocks."
- "Once a customer question has been answered by a corporate through a social media site it doesn't have to be re-answered again and again."
- "We do not deny that this technology will be used by us but to do this will require things we do not know."
- "Banks could start working with third parties for technology because it is hard to change legacy systems."
- "Two banks ask me to build a community for them every week."
- "If the way to make money out of social media was obvious Facebook would be doing it."
- "The designed for purpose of technology in banks is never the purpose it is put to."
- "We might make a product designed for loans and it could end up being used for payments."