How to Rebuild Consumer Trust From the Rubble of Financial Failures

From Northern Rock to Libor and HBOS to payday loans: the list of financial failures goes on and, even if the downturn has bottomed out, the City is still beset by a collective image crisis. The recent customer lockouts at RBS Group caused by faulty systems are just one example of the ongoing issues that all affect consumer trust levels.

Consumer confidence in the sector has steadily declined since clouds gathered over the Square Mile in September 2007 when Northern Rock collapsed. According to Edelman’s 2013 Trust Barometer, trust has dropped to an average of only 50 per cent among the global public; the levels are far lower in the UK at 29%. Meanwhile in its Global Consumer Banking Survey (2012) Ernst & Young stated: “Unfortunately, as banks are only too aware, customers who are losing faith in the industry heavily outnumber those who are feeling more confident… Overall customer confidence in banking continues to fall, with 40% of customers losing trust in the industry over the past year and only 22% gaining confidence.”

In broad terms, UK banks do not encounter the same customer churn rates as energy companies or mobile phone providers. Whilst the overall level of customers planning to change banks has risen from 7% to 12% globally since 2011 (Ernst & Young), that’s not exactly an exponential increase. Perhaps this is because of the hassle involved in switching banks, the lack of an easy mechanism for doing so and general dissatisfaction with providers’ customer service centres that dissuades many people from taking on the task of moving accounts in the first place.

Furthermore, the fact remains that people need banks as much as banks need their customers; we’re not going to become a nation that squirrels its savings away under the mattress overnight regardless of our sentiments towards bankers. Yet neither can banks continue to rely on customer inertia. This September the Payments Council will launch a new and simpler way for people to switch accounts. Its chief executive Adrian Kamellard said: “The… new account switching service will make switching a current account faster, easier, and for the first time it will be backed by a guarantee. It will ensure customers receive a clear and consistent standard level of service so that anyone who wants to switch their provider can be confident about what will happen, and when.”The announcement is bound to result in a spike of switchers and shouldn’t be ignored.

Now I could go into detail about the contents of the Financial Services (Banking Reform) Bill or rehash the findings of the Vickers Report. The fact is, though, that whilst all policy changes are likely to have a major effect on the City, what customers truly care about is how their money is looked after, how easy it is to access and whether they are being treated fairly by their financial services provider or lender.

It will be interesting to see what part the newly formed Financial Conduct Authority(FCA) plays in helping banks restore people’s faith against this backdrop of evolving policy. The FCA’s publicly stated remit is “to make financial markets work well so consumers get a fair deal”; consumer groups and the public will be watching to see how the sector responds to this new framework.

In the meantime, there are myriad issues financial services providers can tackle in order to present a more transparent and trustworthy image. The starting point for banks looking to build trust is for their own employees to believe it and buy into it. That belief must come from the top and permeate the entire organisation. It has been reported that Barclays chief executive Antony Jenkins set out a purpose and values blueprint on arriving in the job that clearly linked customer attitudes and operations to reward.

Barclays is of course not alone in facing negative perceptions and other institutions seem to be following suit. RBS recently unveiled its Sustainability Report including, amongst other things, a frank assessment of previous mistakes and a widening of the role of its Sustainability Committee to include a focus on reputation, conduct, culture and how the bank deals with customers. This is all progress; if others weren’t already looking to follow suit, they ought to be now.
Changing internal culture is the first step, communicating those new values in all you do is the next. In such a complicated industry there is nothing consumers value more than straight talking. From a bank’s brand through to the content and tone of all of its communications, the use of plain English is essential. The clearer information is, the less likely a customer will be to feel suspicious about terms and conditions, and the more likely they are to see their bank as trustworthy.
Another key element in building trust is for banks to take the lead alongside government in educating consumers about financial issues generally. Not all of us are expert in personal economics and the more the industry can offer transparent (and hopefully free-of-charge) advice, the more trusted providers will become. Meanwhile, ministers might also consider acting to reinstate caps on interest rates, in order to curb the worst excesses of payday lenders.

But perhaps the most important thing is for banks to properly examine their customers’ behaviour. What do people actually want? What are the little things they can do that will actually mean a lot? For example, if you asked people whether they would like a return to the days of personal bank managers, the percentage voting ‘yes’ is likely to be high.
It’s perhaps surprising that whilst trust levels in fiscal firms are falling off their own cliff, the vast majority of customers haven’t put their money where their mouths are and switched banks. In an age of social media and financial comparison sites, it’s important to note that consumers are increasingly looking to family, friends and word of mouth to make decisions about who to bank with. Ernst & Young found 71% of customers around the world seek peer recommendation, preferring to trust their social circle rather than banks’ brand messages. Their report states: “Personal recommendations are the most important source of information in mature markets such as the US, Canada, Japan and Australia (63%, 67%, 59% and 63%, respectively) but they are also the leading consideration in many emerging markets and, to an even greater degree, in Brazil (77%), India (82%) and China (84%).”

There appear to be few reasons at the moment for firms to rest on their laurels. As the regulatory system bends and buckles under the weight of policy changes, now is the perfect time for financial services organisations to build and articulate sustainable business strategies that encompass core customer-focused values. Those that grasp the opportunity to share how they are working to restore trust, by returning to core purpose, showing fresh thinking and demonstrating a culture that values customers, will surely reap the benefits.

Samantha Wilding is Director of Sustainable Business at Corporate Culture – the sustainable behaviour change agency.