Home Banking Do Customers Trust Their Banks? The Jury Is Still Out for Now

Do Customers Trust Their Banks? The Jury Is Still Out for Now

by internationalbanker

By Alexander Jones, International Banker


With competition within the global financial-services industry intensifying, selecting the optimal banking institution continues to become more difficult for consumers. Whether it’s a specialist fintech (financial technology) company, a purely digital bank, a challenger bank or a more established, traditional lender, the sheer variety of financial firms offering banking services today makes this choice far from straightforward. In the end, much of the evidence points to the relative trustworthiness of financial institutions as being a crucial—if not the most crucial—factor when making that final decision. Whether banks in 2024 are doing enough to earn that trust, however, is another question.

“The public’s trust in banks is an important aspect of a thriving and stable banking system. Without trust, banks cannot attract or retain customers, including depositors, or meet the credit needs of the communities they serve,” the U.S. Department of the Treasury’s banking regulator, the Office of the Comptroller of the Currency (OCC), wrote in a notice issued in June 2023, observing that banks’ earnings, funding costs and business models can all be impacted by changes in consumer-trust levels and that the “reciprocal nature” of the relationships between trust, safety and soundness should make consumer trust a significant variable for banking regulators. “As consumers watched the very public collapse of Silicon Valley Bank play out across mass media channels, it ignited global concern about the safety and transparency of banking institutions. Amidst balancing a rocky global economy, watching a bank fold sparked many consumer questions. Would other regional banks fall to the same fate? Is my bank transparent with me about their stability?”

It should perhaps come as no surprise, then, that a recent survey conducted by Statista of more than 75,000 people based across 32 nations found that trust is considered the most valued aspect of banking, ranking first across every country included in the research. The survey also revealed that, on average, customers are mostly satisfied with the trustworthiness of their banks, giving them a scorecard of roughly four index points out of five.

Such strong levels of trust seem more evident in the United States today than in Europe. Nonetheless, Forrester’s US Financial Services Customer Trust Index Rankings for 2023, which surveyed more than 10,000 US adults online about their primary financial-services brands—including 13 of the largest and most popular auto and home insurers, 16 banks, 13 credit-card issuers and 11 investment firms—found that consumers’ trust in US financial institutions remains fairly weak. This should come as no surprise, given the banking crisis that emerged in the US in March 2023. That said, US banks were the only firms in the survey to record a measurable improvement in average trust scores.

Europe’s banking sector tells a different story, with Forrester’s European Banking Trust 2023 index showing that most lenders in the region continued to earn low customer-trust levels last year. “Most countries received a weak average customer trust score—except for the UK,” the US research firm noted. “This year’s FS Trust Index revealed that customer trust in three of the four European countries we surveyed (France, Italy, Spain, and the UK) was ‘weak’ on average. We saw a statistically significant decrease in customer trust in Italy compared to 2022. Only the UK received a ‘moderate’ average trust score.”

Analytics firm Kantar collected similar results from its study of how consumers perceive banking institutions, with French, German and Spanish consumers being the most critical of their national and regional banks. Financial institutions in these countries ranked low on transparency, with 17 percent of Spanish consumers rating national banks as “secretive”, much higher than the 7-percent global average, while just 5 percent of French and German consumers ranked their banks as “transparent”. At the top end of the scale, meanwhile, 43 percent of consumers in China rated their national banks as “trustworthy”, and 24 percent reported them to be “transparent” in their actions, far higher than the global averages.

So, what are the reasons for European financial institutions’ low trustworthiness scores? Forrester highlights key deficiencies in two specific levers—dependability and empathy—that continue to underpin their failures in earning customers’ trust. “Lack of empathy poses immediate concerns as consumers grapple with financial challenges stemming from persistently high levels of inflation and interest rates,” Forrester wrote in December, adding that prolonged economic pressures will further raise customers’ anxieties over their financial security. “Financial services firms have a unique opportunity to earn customer trust by understanding these anxieties and taking proactive measures. They can provide tools to help customers become more confident with their finances despite economic uncertainties and improve their financial well-being.”

Repeated malpractice by some of the world’s biggest institutions has not exactly helped to foster a culture of trust, either. The 2008 global financial crisis (GFC) clearly demonstrated why such a trust deficit exists between consumers and their banks, with the collapse of Lehman Brothers and other important financial institutions leading to a wholesale loss of credibility across much of the Western banking system and the ensuing rise of the fintech sector becoming regarded as a viable and possibly more reliable alternative to traditional financial services.

While there is a night-and-day difference in the regulatory oversight of the global banking system between 2008 and 2024, banks continue to betray their customers’ trust. Last July, for instance, Bank of America (BofA) agreed to pay $250 million in fines and compensation to settle claims that it opened accounts without customers’ authorisations, double-charged customers for fees and withheld perks on credit cards. Another major scandal was unearthed in 2016 when the Consumer Financial Protection Bureau (CFPB) fined Wells Fargo $185 million due to the illegal creation of millions of fraudulent savings and checking accounts on behalf of its clients without their consent or knowledge. Wells Fargo is still dealing with the fallout from the scandal, with lawsuits continuing to be filed against the US bank in 2024.

The CFPB was set up to provide US consumers with greater protection in the financial sector. Such agencies should drive much higher trust levels in banking, and the evidence suggests they do. In the United Kingdom, for instance, a recent study conducted by the Financial Services Compensation Scheme (FSCS)—the statutory compensation scheme for customers of authorised UK financial-services firms—found that improved consumer protection is “the top driver of trust” in the UK financial-services industry. The research also revealed that only one-quarter of consumers trusted the UK financial-services industry to operate in clients’ best interests, while a hefty 31 percent of the 2,000 adult respondents distrusted the industry outright. However, 67 percent were more likely to look for providers protected by the FSCS, and 51 percent were more likely to use online financial services if they learned about FSCS protection on a provider’s website.

“Today’s consumers are dealing with challenging financial realities. Rising costs and a squeeze on real incomes mean many are facing financial uncertainty well into their future. Innovations in technology across the sector are creating opportunities for growth, but also greater complexity for consumers,” the FSCS’s chief executive, Caroline Rainbird, said of the study. “In addition, recent unrest in the global banking sector is likely to have tested consumer trust and confidence in the industry, highlighting the importance of a trusted deposit protection scheme that is fit-for-purpose for both eligible individuals and small businesses.”

Against this backdrop, Rainbird added, it has never been more important for the public to have trust in the financial-services industry and confidence that their money is safe. “Understanding of FSCS’s role in promoting trust and confidence is key to helping consumers to feel more confident when making decisions about their finances and can contribute to greater financial stability.”

And with the explosion of digital banking in recent years, it is also increasingly important to highlight just how crucial a financial institution’s cyber-defence capabilities have become as a determinant of trustworthiness. Indeed, banks’ adherence to regulations, risk policies and cybersecurity practices has already become “a core differentiator” for consumers when deciding on a safe place to save their money and invest, according to Gaurav Kapoor, co-CEO and co-founder of MetricStream. “What traditional banks—both large global brands and mid-tier banks—can offer consumers that fintech and other digital-first financial firms cannot is a surety that their money is safe and backed by regulations with cybercrime at an all-time high,” Kapoor wrote in an October 2023 piece for Nasdaq. “Risk-averse consumers will desire the implicit safety of banking with an established global brand.”

The OCC is developing an annual survey to understand, measure and track consumer trust in banking and bank supervision over time. “By surveying the public, the OCC could identify area(s) where trust can be further enhanced,” the bureau’s request for information published on June 9 stated. “The results of the proposed survey may complement existing sources of public and supervisory information and provide additional insight into the many aspects that are important to consider in working to maintain and enhance consumer trust in banking and bank supervision.”


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