The evolution of trust in banking
Banks have long counted trust in their brands as an ongoing strength, but that trust has been eroding for most of the last two decades. We are far from the times when people knew and trusted their bankers. There has been an erosion of trust in traditional banking accelerated by the evolution of fintechs and Big Techs.
Trust in banking is no longer a given; it can change instantly and depends on demographics. For example, age impacts the level of trust consumers have in banks. Incumbent banks are struggling to be relevant, especially with younger audiences. An EY report found 51% of Gen Z and 49% of millennials named a FinTech as their most-trusted financial brand, compared to a mere 20% of those aged 65+. These figures are compared to 28% (a figure consistent across all age groups) trusting a national or regional bank.
The way consumers use and trust digital banking services is transforming too. The digital challenger Rocket Mortgage is evidence of this. Since its inception, Rocket Mortgage has provided more than $1 trillion in home loans while growing its market share from 1.3% in 2009 to 9.2% in 2020.
Banks need to win back the trust of their customers. But how can banks win back the trust of consumers? Especially when trust means different things to different people, what can you do to encourage people to trust you?
When it comes to trust in banking security matters
The strongest influencer of financial trust is the confidence in an FI to protect customer data. It was the top consideration for between 14% and 18% of all ages. The quality of product and service offerings is the next most significant factor, while the ability to help meet financial goals and affordability is also rated highly for most groups.
For older customer segments, security is crucial when it comes to trust. In the past, these customers went into physical banks and deposited money across a counter to a real person. Now customers are asked to ignore this and instead give their money to a machine. Something they can’t talk to or look directly in the eye.
Add to that the effect of security breach stories in the media, and you can see why people have some qualms about trusting any business that only exists online.
Given these concerns, it makes sense to emphasize security to customers and create personalized experiences wherever possible. For example, a video of the CTO explaining a firm’s steps to beat security threats will give a face to a firm. It demonstrates to those wary of a faceless corporation that it is made up of highly qualified people doing their best to keep them safe.
Privacy as a competitive differentiator to build trust in banking
In the data economy, privacy protection is emerging as a competitive differentiator. Consumers want to know that their privacy is protected. Unsurprisingly, most people choose not to have their personal data and activity tracked by giant corporations. As such making, privacy protection a factor impacting consumer choices.
Apple has long preached privacy as one of its core values. Tim Cook has famously said “privacy is a fundamental human right“, and anecdotally, many people rationalize paying extra for an iPhone over other brands for increased privacy. In fact, 52% of Americans decided not to use a product or service because of concerns over data protection. All of this espouses Apple’s success of campaigns around its privacy technology, which clearly indicates that privacy appeals to consumers.
Traditionally FIs have understood the significance of maintaining the privacy and security of financial data. FIs must extend this significant aspect of their identity into the digital realm. By offering the potential of personal data in a secure and privacy-protected environment, banks can augment the trust they’ve earned in the old economy in the digital realm. Banks can once agian build and (hopefully) maintain a reputation of being trustworthy.
Communication for trust in lending
Trust needs to run through every touchpoint of a brand. The most fundamental trust begins way before corporate transparency. It starts with smaller-scale decisions. It starts with the language you use. Simple, clear communication is the key to building a sense of trust. Yet, it often seems to be an afterthought for many banks.
Using language that people easily understand is vital – engaging and straightforward is better than ambiguous and formal language. It makes sense to communicate with customers as people, as first-time buyers, as someone making an enormous purchase rather than as subject experts. So, stripping back the language, making it easy to understand, and being clear about what you are doing, why, and what you need from your customers is essential.
Yet, communication is more than the words we use. From a human perspective, a mortgage is a massive deal for a person. Buying a home is the single biggest purchase of our lives, so naturally, emotions are heightened. Long phone lines, impossible to contact customer support, and interfaces that are not appropriately updated can be stressful. It seems evident that providing mortgage customers (especially first-time buyers) with regular updates about the process, and next steps, essentially letting them know what is going on in a timely fashion, would be very comforting.
The human element in build trust in banking
Something that can easily be overlooked is simply treating people as people. When you spend your time dealing with numbers all day long, whether it’s finances, marketing data, or business performance, it is easy to forget that there are people at the end of all of this.
Customers want to feel valued. Personalizing communications contributes considerably toward this objective. Not just starting an email with their name, but when a customer calls customer support and provides their details, customer support has access to relevant information. Rather than requiring the customer to explain how much they are paying each month etc. Not only does this conveys a high degree of professionalism, but it also contributes to understanding customers. Ultimately, if you understand your customers and have insight into their needs and problems, it is easier to provide products and services they actually want and need.
Summary: how to build trust as a bank
Consumers need to get to know a bank in a way that feels personal. They need to know that a bank shares their values, treats them as people, and speaks to them in their language. The customer experience is a significant factor banks must embrace to build trust. This can present new technological challenges to improve, upgrade, and transform processes and systems to include the customer perspective. Partnering with fintechs to stay up to speed with the rapid pace of tech innovation and offer cutting-edge products to customers makes sense.
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