BANKING ON TRUST

Published : 10 years ago, on 27/06/2014

If bankers want to be loved they still have a lot of work to do six years after the start of the financial crisis. Nick Cooper explains.

Bankers haven’t done too badly in this year’s listing of the world’s most valuable brands. The end of the recession has helped the sector grow brand value 15% among global banks and 6% among regional banks.

That’s well ahead of – or at least on track with – the overall growth of 12% seen across the BrandZ Top 100 Global Brands.

Behind these numbers however, is the continuing struggle that banks of all shapes and sizes face in building meaningful brands that will help them turn customers into consumers.

At the heart of this challenge is trust. Having been battered and bruised in recent times, the evidence shows that consumers are still not ready to forgive banks six years after the start of the financial crisis.

Lack of trust not only drives consumers away but also creates a political and regulatory environment that makes it harder for bankers to make their case heard.

Trust scores for both regional and global sectors remain below pre-recession levels. Regional banks do score ahead of their global counterparts on trust and also score better for meaningful differentiation.  However, this is often a reflection of the more favorable ratings in their home markets and on both scores they still have work to do to recover to pre-recession levels.

Tracking of trustworthiness and recommendation for financial brands shows that while regional banks indexed 104, against an average brand score of 100, this was down from 111 in 2008. Global banks fare even worse, scoring 92 in 2014, compared to 101 in 2008 and 94 in 2013.

Truth be told, global banks weren’t exactly everyone’s friend before the recession and bankers can also take some comfort from the fact that they are not alone in this challenge.

There are parallels with other categories, for example with the oil sector, where national oil companies, often posing as national champions, generally attract far more favorable perceptions than their global competitors.

There are differences however. While the size of domestic oil industries are determined by geological factors, the biggest regional players in the banking world tend to be American and Chinese – because they have access to massive domestic markets that create economies of scale, they can focus investment on one market, and they are more finely attuned to local cultural nuances. As a result, regional players such as Wells Fargo do better when it to comes to the brand contribution in their total brand value. That’s because their domestic markets – where all brands typically perform better – are the dominant factor in their global footprint.

Global banks by contrast tend to be European-based as their home markets are simply not big enough to allow them to grow beyond a certain size.  Globals tend to have a lower brand contribution overall because, even when their domestic brand is strong, they have many markets where their brand contribution is lower.

The brutal truth is that it takes time to develop brand contribution in overseas markets. However, really successful brands can develop a stronger brand abroad, something Samsung has done in the mobile sector, for example.

There is an opportunity to create a strong brand story overseas where the history that can hamper such efforts in a company’s home market is absent.  Most banks have traditionally not excelled in this challenge although some, like HSBC and Santander, are getting there.

Banks need to look at other industries for examples of best practice. In automotive, BMW is a stronger brand in overseas markets such as the UK than it is in Germany; the same is true for Land Rover, which sells 90% of its production as export.

Guinness is another brand that has thrived overseas and is even stronger in Africa than in the British Isles. Here, the brand has developed localized offers, such as carbonated malt beverage Malta or Foreign Extra Stout (better known as FES), to make the brand stick.

In the retail sector, McDonalds has rejuvenated itself by recognizing where it needs to be globally consistent and where to be locally relevant so that it targets families in UK while pitching for the trendy youth night out market in India.

While all banks struggle with the trust issue, there are examples of banks that have responded successfully to this challenge. HSBC, for example, continues to build its brand using a global-local approach (encapsulated by the strapline “the worlds’ local bank”) whilst Wells Fargo has outperformed competitors by responding to local market needs and even opening branches, rather than closing them.

As an industry, however, banks still have ground to make up and the need to address the lack of trust is becoming more urgent, not less. In the UK, for instance, we see not only personal customers and business customers actively looking for alternatives to incumbent banks, but the Government is also actively intervening to create “challenger” brands.

In the face of such threats, banks need to consider three things.  Firstly, in domestic markets, where incumbent banks are lacking consumer trust, they need to look at how to restore trust by changing behaviors – you cannot change perceptions unless you change reality.

Secondly, there is an opportunity for many banks to build trust in their overseas markets, where they are not necessarily seen as part of the trust problem and can work from a clean slate.

Thirdly, and most importantly, banks must ditch the thinking of an incumbent and seek to build brands – because strong brands will build trust. Average brand contribution in banking is low, not because banking is an “unbrandable” sector but because too few banks have created successful brands.

The very best banking brands would pass muster in any sector but they are exceptions to the rule.  In an era where consumer frustration is growing, and where the ability to exercise choice is also increasing, it is time for a new approach.

That means applying the lessons of successful brand building from other categories to enhance the customer brand experience and re-build trust.

Nick Cooper is Senior Partner at Millward Brown Vermeer