PAUL STAMPER Head of Financial Services Research
The global financial crisis in 2007 and 2008 kick started a conversation about trust in the financial services sector in the media, with policymakers, and among the general public. The already established perception, from the 1980s and 1990s, that ‘bankers’ were becoming ever greedier and more rapacious seemed to be reinforced. Added to this was the view that things had become so bad that the behaviour of these highly paid, massively self-interested elites was now having a direct impact on the everyday lives of ordinary people. When conducting focus groups on financial issues in the first few years following the crisis, one had to be prepared for the moment when the public would ‘kick off’ into an impassioned rant about the failings of the sector.
Things have moved on since then and our research shows that at least one aspect of trust in bankers has recovered. From our annual Veracity Index,81 the proportion of people who would trust bankers to tell the truth has actually risen steadily from a low of 21% in 2013, to 41% in 2018. However, it was clear, even at the heart of the sound and fury following the crash, that the trust picture in financial services was far from clear-cut.
As we see in this report, the complex issue of trust operates with particular dynamics in the financial services sector. At the most superficial level, one might ask oneself: “If trust in banks is so relatively low, why is it that we entrust them with all our money?” To some degree, of course, the answer is that we don’t have a great deal of choice. Right across the world, people are increasingly being paid electronically, and financial systems are set up so that a repository and independent guarantor of digital funds is necessary for one to access and use one’s money. Whether distributed ledger technology (the concept behind blockchain and Bitcoin) will eventually offer a credible alternative remains to be seen, but for now, for the vast majority of us, a bank is a necessity.
Revisiting Phillip Pettit’s three forms of trust (below), it would seem that basic trust is so foundational, at least in personal banking, that many would take it as read (a hygiene factor, as referred to in the discussion of the drivers of trust). However, we can’t simply ignore basic trust. A recent high-profile technology failure for TSB, when migrating from one IT system to another, led to many customers being unable to access their money for many days. This failure has not led to TSB losing all its customers, but the out-migration has been considerable. The run on Northern Rock during the financial crisis is another example of the catastrophic impact of failures in basic trust.
Moving to a consideration of active trust, we come to one of the key challenges for the banking and financial services sector. Even the most cursory understanding of how the system works can leave consumers with a sense of imbalance; the interest I receive on my savings is far less than the interest I pay on my borrowing. Against this foundational idea, it is hard to establish a view of the sector as having my wellbeing at heart or treating me well, and because this is about ‘my money’ the subject tends to be emotive. Consumers may accept intellectually that banks need to make money somehow, to pay for the services they provide, but that it is at their customers’ ‘expense’ is a harder reality for many to accept emotionally. When we look at the different elements of trust for banking, we see the highest levels of disagreement (39%) in response to the idea that banks are open and transparent about what they do. Add to this the impact of mis-selling scandals, such as PPI in the UK, and it is easy to see why many consumers find active trust hard to give, even to high street banks, the most directly relatable organisations in the financial services sector.
If active trust is so hard to achieve, interactive trust can easily be seen as a step too far for the financial services industry. The data on trust dimensions appears to bear this out. As a sector, banking is the one consumers are most likely to believe would try and take advantage of them, if it could (52% agree), and only a quarter of people would agree that it has the best intentions or shares their values.
However, the alternative engagement models which some of the neobanks (such as Monzo and N26) and FinTech providers are introducing offer approaches which could enable financial services brands to establish both active and interactive trust. Involving customers in decisions about new product features and launches; being open in discussing and responding to customer concerns; providing products or services which are beneficial to the customer and neutral for the bank (or even, on the surface, detrimental, such as reducing the charges they pay), are all strategies that offer potential for building consumer and customer trust in banks. If the new FinTech companies offer all these alongside reliability and security, the traditional banks will have an even bigger problem.
“Banking is the sector that consumers are most likely to believe would try and take advantage of them, if it could (52% agree)XI”