Rebuilding Consumer Trust in Day-to-Day Banking

Introduction

Consumer trust in Financial Services is at an all time low. In order to attract consumers' money banks and other institutions must first rebuild trust. The importance of trust varies across industry and region but for all FS players trust is a crucial element in retaining and attracting customers.

Scope

*Using global consumer data from our FSCI survey this reports identifies the extent to which trust has been lost.

*The report analyses the causes of this shift & identifies strategies that can be employed to rebuild trust and attract & retain day-to-day customers.

*The report discusses what trust means in the context of day-to-day banking and for customer acquisition and retention, as well as performance.

*A number of key trends are highlighted that describe the interplay between trust, attitudes and behaviour in the wake of the credit crunch.

Highlights

Remarkably, despite 54% of consumers agreeing that they had lost trust in their primary bank since the financial crisis, and 64% lost trust in the entire industry, rates of trust in the our primary banks remain at a very high 72%. Global levels of trust in our day-to-day banking providers have not been affected to the extent assumed.

Financial awareness drives trust. Consumers with higher trust levels most readily agreed with statement pertaining to financial awareness, such as regularly review their finances and keeping up with the financial news in order to make more informed decisions and make more of their money.

Consumers are disinclined to take actions that align with their attitudes. Consumers who indicated a complete loss of trust in their primary banks were no more likely to change their primary bank or even investigate products from other banks in the next six months than those who had not lost any trust in their bank.

Reasons to Purchase

*Access the results of Datamonitor's Global FS Consumer Insight survey, enabling you to understand the drivers behind the loss of trust.

*Identify actionable strategies that can help encourage consumers to re-engage.

Report Highlights
Highlights

Remarkably, despite 54% of consumers agreeing that they had lost trust in their primary bank since the financial crisis, and 64% lost trust in the entire industry, rates of trust in the our primary banks remain at a very high 72%. Global levels of trust in our day-to-day banking providers have not been affected to the extent assumed.

Financial awareness drives trust. Consumers with higher trust levels most readily agreed with statement pertaining to financial awareness, such as regularly review their finances and keeping up with the financial news in order to make more informed decisions and make more of their money.

Consumers are disinclined to take actions that align with their attitudes. Consumers who indicated a complete loss of trust in their primary banks were no more likely to change their primary bank or even investigate products from other banks in the next six months than those who had not lost any trust in their bank.
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Table of Contents 2
Table of figures 3
Table of tables 4
Introduction: Trust in the context of Financial Services 5
Defining the intangible: what is trust? 5
Datamonitor's Trust Process attempts to capture both the static and the dynamic elements of consumer trust 6
An improved level of trust can directly benefit customer acquisition, retention and overall performance 7
Trust is manifested in the market through a variety of means 9
Once lost, trust is hard to recover but is relative to the distrust felt for other organizations 9
Long queues outside branches were evidence of a loss of trust in Northern Rock 10
However, trust is a fickle emotion, subject to the relative distrust of others 11
The collapse of Fannie Mae and Freddie Mac is another example of the fallout from lost trust 11
A wider range of stakeholders must take responsibility for rebuilding trust and this is the real challenge for the industry 11
Industry bodies must accept their own responsibilities and avoid passing the buck 14
The Future Decoded 16
Trend: Consumer trust in the banking industry has been severely damaged 16
Insight: Trust is more robust than is commonly assumed 16
Day-to-day banking has not been affected to the extent assumed 16
Trust is driven largely by external day-to-day factors 16
Trust is unaffected by the length of a consumer's relationship with their primary bank 18
Insight: Relative to other retail industries and financial services institutions, consumers still trust banks above all 20
Trust in financial services providers as well as other industries is subject to considerable variability 21
Banks are still more trusted than other supermarkets globally but the gap in trust between financial services and supermarkets and other retailers is closing 22
Insight: Consumers are more inclined to trust their primary bank rather than the entire industry 23
Evidence suggests a base level of trust in day-to-day banks 25
Insight: Trust in day-to-day banking varies according to different market segments 27
Trust has been most impacted in the West 27
Older consumers trust their primary banks more than younger consumers 30
Consumers with greater financial awareness have greater trust 30
Trend: Communication is vital in a media savvy world 33
Insight: Consumers' trust in day-to-day banking is influenced by communication from above 33
Communication surrounding the entire industry had a greater effect on trust than communication surrounding primary banks 33
Consumers feel that their bank has taken a responsible stance in the current global financial downturn 34
Consumers feel that there is little that their bank can do to improve trust in the face of the banking crisis 34
Communication directly from consumers primary banks' is a drive of trust 35
Insight: Consumers are more likely to trust their bank if they feel that they can interact 37
One of the primary reasons that consumers prefer not to conduct their day-to-day banking online is that they prefer face-to-face interaction 37
The increase in the use of social networking websites is helping consumers to interact more with their bank 39
Trend: Consumers are disinclined to take actions that align with their attitudes 39
Insight: Consumers show a strong bias toward the status quo in their day-to-day banking relationships 40
Action Points 42
Action: Banks should use the recession as an opportunity for innovation in communication and interaction 42
Drive users to a website that maximizes Web 2.0 technology 42
Experiment more boldly with social media tools 43
Improve the in-branch experience 44
Action: Learn from other industries that are threatening, and in some countries taking over, the trust consumers have in banks 47
Financial services aggregators hold a greater degree of trust than the industry's individual players 47
Lessons can also be learned from the relative trust in the supermarket industry 47
APPENDIX 48
Supplementary data 48
Methodology 56
Further reading 57
Ask the analyst 57
Datamonitor consulting 57
Disclaimer 58
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List of Tables
Table 1: Relationship between the extent to which consumers' lives have worsened or improved and their loss of trust in primary bank since before the credit crunch (where 1 = strongly disagree and 5 = strongly agree) 48
Table 2: Relationship between the extent to which consumers' lives have worsened or improved and their level of trust in primary bank (where 1 = lowest level of trust and 5 = highest level of trust) 48
Table 3: Relationship between the extent to which consumers have always banked with the same bank (where 1 = strongly disagree and 5 = strongly agree) and their likelihood of changing banks in the next six months (where 1 = least likely and 5 = most likely) 49
Table 4: Levels of trust in different industries and financial services institutions, comparing UK and US levels and global levels (where 1 = lowest level of trust and 5 = highest level of trust) 49
Table 5: Levels of trust in the entire banking industry and primary banks (where 1 = lowest level of trust and 5 = highest level of trust) 50
Table 6: Relationship between loss of trust in the entire banking industry and primary banks since before the credit crunch by country (where 1 = lowest level of trust and 5 = highest level of trust) 51
Table 7: Relationship between levels of trust in the entire banking industry and levels of trust in primary bank (where 1 = lowest level of trust and 5 = highest level of trust) 51
Table 8: Relationship between loss of trust in the entire banking industry and primary banks since before the credit crunch (where 1 = strongly disagree and 5 = strongly agree) 52
Table 9: Levels of trust in the entire industry and primary banks by age group (where 1 = lowest level of trust and 5 = highest level of trust) 52
Table 10: Levels of agreement with financial awareness indicators among those who trusted their primary bank and the entire industry (where 1 = strong disagree and 5 = strongly agree) 53
Table 11: Comparison between trust levels in primary banks and entire industry based on frequency of reading papers (where 1 = lowest level of trust and 5 = highest level of trust) 53
Table 12: Levels of agreement with trust influence statements (where 1 = strong disagree and 5 = strongly agree) 54
Table 13: Relationship between the extent to which consumers believe their bank has taken steps to reassure them that their money is safe (where 1 = strong disagree and 5 = strongly agree) and trust in their primary bank (where 1 = lowest level of trust and 5 = highest level of trust) 54
Table 14: Indicators of why consumers do not bank online (of those that are not registered to bank online) 55
Table 15: Relationship between trust levels in primary banks and the extent to which consumers prefer to deal with people in the branch (where 1 = lowest level of trust and 5 = highest level of trust) 55
Table 16: Relationship between loss of trust in primary banks since before the credit crunch (where 1 = strong disagree and 5 = strongly agree), and the likelihood of consumers to change their primary bank or investigate the banking products and services available from other banks in the next 6 months (where 1 = least likely and 5 = most likely) 55
List of Figures
Figure 1: The Datamonitor Trust Process 6
Figure 2: Increased trust helps to build up customer acquisition/retention and improve performance 8
Figure 3: Customers queuing outside Northern Rock as they lose their trust in the bank's business model 10
Figure 4: Consumers globally feel that government and businesses share responsibility for the crisis 12
Figure 5: 53% of consumers globally feel that government should be held most responsible for solving the financial credit crisis 13
Figure 6: 64% of Indonesian consumers believe government and regulators are most responsible for solving the financial credit crisis. 14
Figure 7: Consumers indicated that they had lost trust in their primary bank since before the credit crunch 17
Figure 8: Consumers whose lives have worsened since the crunch have less trust in their primary bank 18
Figure 9: Consumers who have always banked with the same bank were only marginally less likely to change their primary bank in the next six months 19
Figure 10: Consumers who have always banked with the same bank had marginally more trust in their bank 20
Figure 11: Trust in banks in the UK and US has slipped significantly in comparison to the global average 21
Figure 12: Trust in supermarkets is closing in on that of banks in the UK 22
Figure 13: There is consistent global disparity in trust level between the entire banking industry and primary banks 23
Figure 14: There is consistent global disparity between the loss of trust in the entire industry and primary banks 24
Figure 15: The artist David Fryer created artwork depicting Fred Goodwin's head on a stick 25
Figure 16: Trust levels between primary banks and the industry show some correlation 26
Figure 17: The loss of trust in both primary banks and the industry shows correlation 27
Figure 18: Loss of trust in primary banks shows global variance 28
Figure 19: Edelman's research supports Datamonitor's findings that there is global variance in bank trust 29
Figure 20: Trust varies according to age 30
Figure 21: Trust levels vary according to financial awareness 31
Figure 22: Trust levels vary according to how often consumers read newspapers 32
Figure 23: Weber Shandwick has found communication to be a strong driver of trust 33
Figure 24: Consumers readily agreed that negative publicity surrounding the industry impacted their trust 35
Figure 25: Consumers are most trusting when they feel that their bank has taken steps to reassure them that their money is safe 36
Figure 26: One of the primary reasons for not using online banking is a preference for in-branch interaction 38
Figure 27: In-branch versus online banking preferences have very little bearing on trust 39
Figure 28: Loss of trust in primary banks does not motivate consumers into action 40
Figure 29: Use of social media such as Twitter represents a key marketing opportunity 44
Figure 30: Barclays pilots Microsoft Surface technology in its concept branch, launched in December 2008 46
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