FACEBOOK AND BANKING

A couple of weeks ago, Toronto-Dominion became the first bank to create a presence on Facebook. For those of you just getting back from a 5Y stint in the Kyrgyz Republic, Facebook is a social networking site, similar to MySpace. It is designed to keep the world informed about who you are and what type (and number) of friends you keep. While originality derided by critics as an "exercise in narcissism," these social networking cites are now solidly part of the culture. For some reason, information that users would not share with their friends, family or coworkers, is acceptable to post on the semi-public space of these sites. For about $10k plus design costs, the Bank launched Money Lounge - a discussion group for students to learn about being financially independent from their parents. While the attempt is a little like watching your CEO krump (read - painfully awkward), we have to give the bank credit for starting somewhere. The question arises - can a bank, which is the epitome of stodginess, create a brand in a space that prides itself on being non-commercial and edgy? Remember it wasn't too long ago that Craiglist.org was also non-commercial, but now commercial enterprises compose an estimated 25% of its transactions. In between answering how to eat for $7 per day and offering a calculator that splits your bills by the number of roommates, the Money Lounge creates a modicum of response and occasionally gets feedback from students (in between a heavy dose of traffic from employees) on how to improve their marketing and image. More importantly, TD establishes a beachhead on what is becoming one of the most important demographic segments of banking. For those that like numbers, consider that Facebook has 34mm users worldwide and garners a 39% marketshare of 18 to 21 year olds. Banks that catch these 20-somethings in their financial formative years, have a higher chance of retaining these clients as they move into their extremely lucrative 30s and 40s. So far, this 6-month pilot program as grabbed 3,000 discussion group "joiners" and adds a handful of new ones each day. Community banks need to continue to seek new ways to engage a younger demographic and become more relevant in their lives. Money Lounge attempts to do just that and gives TD insight into promotions that work. Offer an iPod and you are likely to get a less than overwhelming response, however offer a chance at a summer job or scholarship, and your response rate will increase by a factor of 5. If a bank can figure out how to harness the energy in social networking sites, not only will it promote its brand, but it can dramatically decrease its cost of acquisition (since the medium is so scalable). This foray into the uncharted world of social networking sites will give TD an important leg up on its competition. We will continue to monitor the success and failures on Facebook, but if you haven't joined a social networking site, we encourage bank management and marketing to do so. It will create an awareness of the dynamics that take place in this potential market space. If nothing else, banks can learn a lot about their younger employees.