Despite its recognised importance to businesses, trust is often found wanting in today’s banking relationships. Each financial institution must consider what trust means uniquely for its business and how it wants to be perceived in customers’ minds, as there is no one-size- fits-all approach when it comes to building longstanding relationships with customers.
The central objective, however, holds true across all banks: the goal should be to assure customers that their best interests are always at the fore, and that banks are committed to improving their financial well-being.
When done right, trust can serve as a foundation for enhanced product offerings, better use of digital tools, and ultimately, increased customer engagement and retention. An institution with a loyal customer base can go “beyond banking” with value-adding services that would help them to expand their market share and create more durable customer relationships. For those banks that view being trusted as a strategic imperative, this abstract quality can become a crucial predictor, and driver even, of future business, through both expanding relationships and obtaining referrals. The erosion of trust, on the other hand, can have a devastating effect on a business’s reputation, its bottom line and competitive standing.
Our research reveals that trust in banks is not static, and there is significant room for improvements to be made. Findings from EY’s 2016 Global Consumer Banking Survey suggest that, on one hand, banks are largely trusted to keep consumers’ money safe, but on the other, relatively few consumers truly trust their banks to provide unbiased advice that puts their needs first.
Traditional banks also fall behind non-traditional competitors on transparency of fees and recommending relevant products and services. EY’s research found that less than a quarter of customers (23 percent) have complete trust that their bank will recommend the product that is best suited for their needs. This perception of banks as self-serving inhibits a good relationship, and can leave customers with the belief that their bank does what is best for its bottom line, not theirs.
It is clear that high-quality customer service is essential to building and maintaining trust. In many cases, banks are not meeting the needs and expectations of individual clients. Failure to meet these expectations hurts the incumbent providers, especially with the increasing availability of intriguing alternatives and non-traditional financial-services firms that have greater digital capabilities and higher-rated customer service. There is a relationship between trust and future purchase intent, so failure to nurture positive relationships will inevitably cause customer, and subsequently bottom line, losses.
Legacy challenges are partly to blame: the siloed organisational structures and legacy information-technology (IT) systems of traditional banks often mean that front office does not have easy access to all of the information it needs to provide customers with quality or tailored advice on the spot. Front-line staff, therefore, have few options but to make limited recommendations and have little ability to answer every question about existing accounts or resolve issues. But these front-office workers are linchpins, the main point of interaction with customers, where trust is either built or lost. Lack of resources and information could send those customers out the door into the arms of competitors.
By contrast, digitally savvy, non-traditional players, such as fintech providers, retailers and technology companies, have the data and technology to deliver truly exceptional service. Interestingly, their success corresponds to the rise of financial self-management: a critical mass of customers is now much less reliant on banks for guidance, and EY research shows that half of customers do not need help managing their finances. The number is even higher amongst financially savvy customers, who have a clear understanding of the different financial products and services available to them. Non-traditional players have empowered more people to take control of their finances and have given them the digital tools to do so.
Fee transparency is another key driver of trust, as well as advocacy, identified by EY’s research. If customers do not feel their bank is being transparent about its fees, they are less likely to recommend it to others; only 32 percent of consumers globally have complete trust that their bank is providing full transparency on fees and charges. Banks are therefore missing out on future business, confirming that simply being honest and upfront can offer tangible top-line and bottom-line benefits.
Traditional banks also lag behind non-bank competitors in this regard: only 31 percent of traditional bank customers have complete trust that their banks are fully transparent about their fees versus 38 percent for Internet-only bank customers. Fee transparency is seen as an element of baseline trust for banks, so this should serve as a warning signal to incumbent institutions, especially as customers today increasingly associate transparency with digital channels.
The good news is that our data shows banks are not lagging far behind non-traditional competitors. While we found that incumbent institutions had the lowest levels of trust when compared to non-bank competitors, the difference is marginal. By taking well-thought-through, concerted action to rebuild trust, traditional banks have a real opportunity to get ahead of new competitors, making the best of their scale, brand, customer base and mature infrastructure. A customer base who truly believes that their bank is honest and upfront about product pricing and fees will result in higher consumer satisfaction, improved retention, stronger advocacy and more opportunities to cross-sell. Increased transparency is a prerequisite for banks to assume, or reassume, the role of trusted advisor.
Following a recent spate of high-profile cyberattacks and data breaches, it is no secret that customers are concerned about data security and privacy, but their impact on banking relationships and customer trust seems to be nearing a tipping point. Nearly two-thirds, or 60 percent, of global consumers worry about hacking of bank accounts or bank cards, and 59 percent worry about the amount of personal information private and public sector organizations have about them. There is a clear opportunity for banks to gain a competitive advantage by serving as data custodians; strong defenders of sensitive and valuable information against data and cyber-security threats.
Banks should look at ways to build extra controls and security measures in customer products, and effectively communicate these “extras” so that customers have a clear understanding that their bank considers data security and privacy a top priority.
Implementing these measures could in turn lead to a symbiotic relationship with customers. If customers trust a bank to protect their data, they will be more comfortable sharing personal information that could enhance the services they receive. Thirty-six percent of customers said that they would be happy to share more personal data with financial-services providers if it meant that their banks could better anticipate their needs. Mastering data, in regard to both security and customer service, opens the door to a broader, more trusted relationship with customers—and a greater share of the wallet.
This article contains just some of the actions which banks—traditional and non-traditional—must take to establish themselves as trusted advisors in the minds of their customers. If banks are to retain or expand market share, they must convincingly and consistently demonstrate their interests in each customer’s long-term financial well-being.
In practical terms, banks must combine upgraded technology and improved data access with new service models, cultural change and increased transparency. Certainly, there must be greater emphasis placed on customer education and the availability of information, but ultimately consumers need to be reassured that their bank is willing and able to “do the right thing” for them.
Yes, considerable investment of resources and energy will be required. But the payoff of increased advocacy and future business makes for a clear and compelling business case. Trust is the foothold of the traditional bank, and with many assets at their fingertips, they are on the precipice of redefining themselves, or otherwise risking substantial, negative impact from new entrants. Trust is very much an asset to be managed and optimized.