Consumer Trust in Banking: Why it Matters Now, More than Ever

While, under normal circumstances, most customers trust their financial services provider to manage their transactions and their data, only 43% believe their bank truly cares about their long-term financial needs. This is important as consumer trust in banking drives behaviours; building loyalty and generating opportunities for revenue growth if fostered correctly or creating risk if customers choose to disengage.

The consequences of mistrust are most evident in the case of financial difficulties. Accenture research shows that when a major life event like a divorce, loss of a loved one, unemployment etc. causes financial instability, only 51% of customers seek some form of help with their financial predicament. Of this group, just 28% did so from their bank, with the large majority turning instead to family and friends, leaving the majority of customers without support from their provider.

While support may be available, this widespread scepticism and lack of trust in financial services providers is causing customers to turn away in moments of need. This leaves many without the expert advice that could help them manage their situation, preferring a ‘go it alone’ approach and enhancing the risk of defaulting on debt.

Even towards the end of 2019, despite relatively good macroeconomic conditions, it was reported that only 29% of consumers were earning more than they spent each month. In light of the COVID-19 crisis and UK unemployment increasing by 600,000 (as of June 2020), many more consumers are likely to find themselves encountering difficulties over the coming months. To minimise the impact on consumers and the consequences of bad debt, banks must seek to re-establish themselves as trusted advisors and sources of help. With that in mind, here are three ways in which they can increase consumer trust in banking:

1. Be purpose driven

In the digital era, incumbent providers have generally sought to increase customer engagement by improving their range of digital services. This has broadly been a success, with growing numbers of consumers across all demographics regularly interacting through apps and other means of digital engagement.

The benefits of this digitalisation are well established, from reduced costs to more streamlined customer interactions. Nevertheless, an unintended consequence of this largely transactional form of engagement is a loss of emotional connection between customer and bank, and a failure to build the relationship that positions the bank as the trusted source of advice and support in moments of difficulty.

Banks must therefore define and reiterate the purpose they are there to serve. Purpose should not be about just economic exchanges, it must reflect something higher and more aspirational, and focus on mutual wins. Ways in which this can filter through to customers include managing the communication strategy so that banks are seen as the source of help, ensuring that advice is impartial without necessarily leading to a sale, and always focusing on the client’s best interests, even if it means on some occasions recommending a competitor.

There should be a recognition that if most customer interactions with a bank are digital self-serve, the moments in which they do speak with an advisor become even more significant for relationship building. Therefore, the internal culture amongst front line advisors is mission critical, and they must be aligned to the broader purpose the bank is there to serve.

2. Be proactive

With government support, banks have been able to offer a range of measures to ease the initial impact of the pandemic and closure of many businesses, e.g. loan repayment holidays or waiving overdraft fees. Although we may be gradually easing out of lockdown, the outlook for many remains severe and are likely to need continual support.

If customers encountering difficulties are not coming to you, you must proactively seek out ways to engage with them. It’s important to recognise that, in what is likely to be an emotionally challenging time, customers may have different preferences in terms of how you offer help.

Banks should, where possible, seek to facilitate customer needs. Some, for instance, might value the opportunity for a ‘financial wellness session’ to talk through the source of the difficulty and receive advice on how they can manage the situation, while others may prefer to simply access funding via a self-service channel. Banks must therefore anticipate a customer’s needs and offer ways to help.  

In light of the current crisis, customers may need educating: many may be accessing certain financial products for the first time, and with the close of branches many ‘traditional’ customers have been forced to adopt digital channels which they haven’t used before.  There are numerous lessons to be learned from leading global banks, who have anticipated and overcome these hurdles, for instance Lloyds sent tablets to senior customers over the age of 70 who lacked suitable devices for online banking and partnered with a digital training service to help them get started.

3. Be transparent

Many banks overestimate customers’ financial literacy. Customers do not trust what they do not understand, and although banks do give the correct advice in line with regulatory requirements, for ordinary customers, this information can often seem abstract and the implications of making a decision unclear.

This is, however, one area in which the challenger banks have particularly excelled. Boasting generally much higher satisfaction, loyalty and trust indicators, challengers have typically been able to strike a good balance between presenting complex financial information in a customer friendly way while simultaneously adhering to stringent regulatory standards.

In doing so, consumers feel that these are the ‘good guys’ who make it easy to make the right decision for them. They want to engage because it feels beneficial to do so, as through this enhanced understanding they can better take control of their financial affairs.

While it is important to ensure the legal documents are presented, incumbents should think about how they can make the implications of financial decisions clearer. CX technology can be beneficial in this respect. RBS, for instance, help their telephony mortgage customers to understand their offer by using Vizolution’s technology, allowing their advisors to highlight key terms within documents, present the legal information while also freeing up the advisor to explain what everything means clearly and succinctly.

While the pandemic has undoubtedly put the global economy is one of the most precarious situations in living memory, applied correctly these principles will help banks maintain stability and be a genuine source of help to customers in this challenging time. Shareholders are now, more than ever, accepting of the need for change, and a shift towards being more purpose orientated, pre-emptive and transparent is likely to yield long-term benefits in the form of new revenue streams and greater customer loyalty.

As lockdown eases, banks must prioritise gaining consumer trust and enhancing the customer experience in a digital world. By building deeper and more meaningful customer relationships, this will over time generate mutual wins for banks and customers alike.

To find out how Vizolution are helping improve consumer trust in banking by transforming customer journeys for Santander and RBS, click here.

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