Here’s an odd one: two of Sweden’s largest banks have spent the weekend dealing with a run, after Twitter-fueled rumors of financial difficulties led to panicked withdrawals from thousands of ATMs in nearby Latvia.
As many as 10,000 customers in the Baltic republic withdrew large amounts of capital from both Swedbank and SEB, emptying cash machines of $29 million and leading to local reports of long queues and spreading concern.
The banks — which both deny that they face any problems — say that the alarm was sparked by a groundless Twitter rumor suggesting Swedish banks were preparing to withdraw their business from the country, and that their ATMs would soon become useless.
That seemed to be enough to work up customers in the Baltic state — which, with a population of 2.2 million people is around the size of Utah. According to Reuters:
One man, standing in a queue at a Swedbank ATM in central Riga, said he had heard a report the bank was about to go bust. He declined to give his name. A woman, who also declined to be identified, said her son had called her and told her to get her money out of the bank, but that she didn’t know anything more.
The news may have been spurious, but it tapped into the wider mood of worry: two weeks ago the Latvian government stepped in to take over struggling local bank Krajbanka. It seems like the rumor was perfectly built to infect the public.
But was this a “Twitter bank run”?
I am always skeptical of anyone ascribing public action to social media, as if people themselves play no part in events.
Take, for example, the London riots earlier this summer, which politicians and many media outlets were quick to describe as “Twitter riots” or take aim at BlackBerry Messenger.
Turns out that although messaging was used by some rioters for loose, spontaneous coordination, the meme was spread largely by word of mouth. In fact, recent academic research suggests that social media was actually positive overall.
“Politicians and commentators were quick to claim that social media played an important role in inciting and organising riots,” Professor Rob Procter of the University of Manchester told The Guardian recently. “In contrast, we do find strong evidence that Twitter was a valuable tool for mobilizing support for the post-riot clean-up and for organizing specific clean-up activities.”
Despite my hesitation, however, early indications here seem to suggest that this actually was a problem exacerbated by Twitter.
In fact, the Latvian financial regulator made a public statement saying that customers had “no need to worry” and that the run was the result of a “groundless wave of rumors… on Internet media and social websites”.
Recognizing this is important, because it shows that spreading incorrect real-time information can have drastic — even tragic — outcomes.
We’ve already seen the damage that real-time feedback loops can have on highly automated systems like the financial trading markets — sending stocks plummeting in seconds as poor data causes software to make a cascade of increasingly negative decisions.
Imagine the potential for this sort of problem. Sure, this time Swedbank and SEB were able to absorb the impact, but it’s not hard to imagine a situation where the accelerated spread of information actually ends up causing the problem it’s warning people about.
I doubt this is the last time we’ll hear a story like this.