I think this is one of the issues that Banks have a hard time dealing with. Internal politics, and fear of PR damage. It needs commitment at the highest level to overcome this.
Fears over brand damage are preventing the UK’s major retail banks and building societies from implementing Web 2.0 applications, according to research conducted by IT specialist Conchango
Source: Finextra: Fears of brand damage scaring banks away from Web 2.0
Technorati tags: banks+web2.0
Bankwatch 
It is ironic that the lack of Web 2.0 features is what will really hurt the brand.
I don’t really see what there is to be scared of. Have you ever heard of any bank that has had a loss of reputation due to using Web 2.0? I don’t think banks are scared as much as don’t want to or see the value in putting the time, effort and resources to blog, post videos, update the wiki, etc. Most people at community banks wear so many hats that they already don’t have enough time to do their everyday work. Look for social media consulting firms to start pushing for banking business real soon.
I am inclined to agree with you both. PR damage is the reason provided, but the real reason is internal politics. Once you divest some control to customers, there is no job for middle management, especially marketing, as those jobs are defined today. So of course they will resist, and what better way than to convince the CEO that the brand would suffer.
you know… I’ve REALLY got to start reading more carefully. When I first looked at this post, I thought it said “Conchango suggests brain damage is Bank’s fear of Web 2.0”. 🙂
Without a doubt that is their fear, but it is unjustified. It’s not just a bank fear but also one in the Credit Union side of the biz.
Fair comment Benry … but the key difference is that the CU movement is obviously more willing to address the concern head on, than the Banks.
Recently, I suggested to a major European bank that they consider allowing user-generated content in their channels. Firstly, there was a gasp of disbelief at the suggestion from all the marketing people. Naturally, they were having brain-explosions about having people write things not under their control that would none-the-less influence their perception in the market. But then I pointed out that people are writing stuff *anyway*, so why not have it in their channels? They got this, after a moment of thought.
I think the moral of the story is that rational bank marketers, once they get through their initial horror, are well able to move forward to Web 2.0, but they might need some pushing to do it.