• Consumer confidence in the UK banking system is stabilising
• 85% of consumers trust banks to some degree but only 26% have complete trust
• The UK still lags most global markets in terms of confidence and trust
• The number of unhappy customers who plan to close their account has doubled

The UK banking industry lags most global markets in terms of restoring trust, but, after years of decline, consumer confidence in the banking system is stabilising according to the EY Global Consumer Banking Survey.

Despite this, banks are still struggling to build brand loyalty. In the low interest rate environment, consumers are highly price-sensitive and increasingly likely to change their banking provider because of rates and fees.

EY surveyed 32,000 banking customers across 43 countries, including 767 consumers from the UK. The interviews took place in the autumn of 2013.

Almost two-thirds of UK consumers said their confidence in banks decreased in both 2011 and 2012. But in 2013 confidence began to stabilise. 52% of consumers said their level of confidence had not changed; 37% said their confidence decreased; and 11% said confidence increased –  broadly double the percentage who said their confidence increased in 2011 (6%) and 2012 (5%).

Omar Ali, UK banking and capital markets leader says: “After hitting rock bottom in 2012, consumers’ confidence levels for 2013 show a massive improvement. This is largely due to the improving economy and increased financial stability, but is also a reflection of the steps banks are taking to deal with legacy issues and to improve customer experience. However, we can’t get ahead of ourselves. Confidence levels are stabilising, not increasing, and banks still have a lot of work to do. Confidence and trust in UK banks lags most markets globally, including the US, who arguably suffered a comparable crisis.”

Eighty-five percent of UK consumers trust their bank to some degree. But, of those, just 26% have complete trust; 59% have moderate trust – a neutral position that could swing positive or negative over time; and 15% of consumers have minimal or no trust in their bank. This is double the level of mistrust found in the US, Germany, France and Switzerland and puts the UK industry on a par with Spanish and Russian banks.

Bad press is the key driver of distrust for banks

The survey showed the influencing factors for the different levels of (dis)trust consumers have for their bank. For those with minimal or no trust, the main driver is recent news articles (67%), followed by financial stability (51%) and interest rates on their accounts (49%).

However, people who do trust banks do so because of the way they are treated by their individual bank and because they are confident their money is safe. 68% of people with complete trust in their bank cite the way they are treated as the key driver of trust, followed by the ability to withdraw money (56%), security (51%) and financial stability (50%). Good service overrides concerns caused by bad press by this group (an influencer of trust for just 6% of consumers with complete trust in their bank), or anecdotes from friends and family (7%).

Trust does not translate into loyalty; twice as many customers looking to switch

The number of disgruntled consumers who intend to close an account increased by 50% this year in the UK. Rates and fees are undeniably the main reason people switch banks in the UK – 66% of those who had switched bank in the last 12 months did so because of rates or fees. Customer experience ranks a distant second as a motive for switching (28%) and, while negative press is the primary cause of distrust in banks, the survey shows that a bank’s reputation has very little to do with customers actually switching. Just 7% cited press coverage as the reason they switched.

The UK consumer is very sensitive to rates and fees. The British are second only to the Germans (68%) in citing fees as the primary reason for switching banks. This is much higher than the global average (39%) and higher than other comparable markets such as the US (47%), France (51%) or Switzerland (45%).

Penney Frohling, financial services strategy lead in the UK for EY, says: “Consumers are more interested in their own financial well-being than in the reputation of an individual bank and are increasingly voting with their feet over fees, rates and charges. Despite the energy being put into rebuilding trust at all major retail banks in the UK, improving trust is not (yet) converting into business benefit for banks.”

Banks need to start treating people as individuals as well as delivering on the basics

Getting the basics of banking right is still very important. In the UK, 90% of customers rank convenience as the most important aspect of customer service, followed by security (78%), rates and fees (66%), relationship (66%) and personalisation or consultation (62%).

But when asked about what would make them increase their deposits or investments, add accounts or services, or even pay a little more, personalisation and customisation ranked highly. Two-thirds of consumers would increase deposits or investment, add accounts or services, or pay more if their bank found new ways to improve their service.  55% would do the same if they respected religious or cultural requirements and 48% would do the same if the bank provided plans to help them reach their financial goals.

Penney says: “People value convenience and accuracy from their banks but this is a basic service that consumers expect banks to get right. Real added value for the consumer will only come from banks recognising them as individuals. There’s a major trend towards bespoke offerings in other sectors from fashion to fitness and people are going to expect similar levels of personalisation from their banks.”

Omar says “The most interesting thing about the responses to what people would pay more for is how they align to broader demographic trends we’re seeing in the UK. People want financial advice, which reflects the ageing population and savings gap. People want products and services that suit their culture and religion, which reflects how ethnically diverse the UK market is becoming. Banks can and should be anticipating these trends. And banks will need to become part of the movement towards co-creation of products if they want to win customers over in a market as diverse and competitive as the UK.”