Restoring Trust in Banking

Deanna
Deanna

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According to a multi-decade Gallup tracking poll taken in Sept 2010, only 18% of Americans have a 'great deal of confidence' in US banks. The well-respected Edelman Trust Barometer Survey taken in 2012 later verified this result. It is interesting to view how this ratio has changed over time: it started at 60% in 1979, dipped to 30% in the early 90s and then rose to 53% in 2005 before taking its current plunge. At 18% banks score the lowest of any business industry segment. I recently had the opportunity to moderate a panel of bank CEOs and region heads at the February meeting of the Puget Sound Chapter of the Risk Management Association. Restoring trust was an important topic for the panel, which consisted of Scott Kisting of AmericanWest, Pat Fahey of First Sound, Greg Seibly of Sterling, and Bob Peters from Bank of America. They know intuitively what Bain and Company have been able to quantify; a customer that is a net promoter of your bank is worth $10,000 more over their lifetime than a customer that is not a promoter. Trust is a very hard thing to attain, and once lost, takes a long time to win back. In the mean time, non-bank competitors and credit unions have filled the vacuum and occupy a preferential space in consumer hearts and minds. However, as history shows, banks have the ability to recover what they have lost.

1. Employees

In rebuilding trust, my first focus is always on building engagement with customer-facing employees. Management focus and messaging does not have an impact unless it is able to filter down to a customer’s experience. Customers’ perception of trust is influenced by things like ill-considered fees, disconnected processes, and slow response time. We can only combat these trust diluting problems if employees are steeped in the company message and empowered to do the right thing for customers. Since branch usage is becoming more confined to complex transactions and account openings, it is even more crucial that the customer-facing employees are able to instill trust and convince the customer that they are acting in their best interest. Banks must take steps to enable and empower frontline employees – branch managers, branch staff, and commercial banking officers - if they want to impact the trust equation. People who work with me know that I frequently say, ‘You can be in control but not controlling.’ Employees want to make customers happy and feel the most engaged when they can do that. Processes, pay, and bad management frequently get in the way. That is why we should focus on making lives easier for frontline staff by reducing the clutter of systems they have to use, reducing process steps, simplifying products, and finding systematic ways to give them some authority while keeping robust limits and risk monitoring centralized.

2. Incentives

Of course, any comprehensive program needs to include pay and incentives. As the industry has learned, incentive programs significantly influence behavior with good and bad consequences. I believe that in the 2000’s banks frequently did not understand what type of behavior their incentives were actually driving. A poorly designed incentive system can do more damage to trust than any other factor. Why not shift to pay systems that are designed around customer satisfaction and trust? It is entirely possible to do this and not lose sales.

3. Organizational Structure

Third, appoint a Consumer Champion. This should be an executive committee level job with real responsibility and authority. Just as it is necessary to appoint senior independent positions around risk, banks need senior independent executives cutting through red tape to focus on the value and quality of service that consumers are getting. Along with this position, comprehensive and systematic reporting of customer metrics that go beyond simple satisfaction surveys should be implemented. As the old adage goes, you can’t manage what you can’t measure.

4. Products

On the product front, I am frequently surprised how little headway the industry has made since the credit crunch. We still basically have the same product set as 2006. Consumers want transparency in terms of straightforward and easy to understand product design that meets their needs. Foregone profit or financial risk can be used to justify convoluted and poorly thought out product design. However, I have found that products can and must be simplified and profitable at the same time. To quote my former boss, Lou Pepper, ‘Your most profitable product will be the one that meets the needs of your customer the best.’

Lastly, as bankers our actions need to match our words. We use the term customer-centric frequently without fully considering its implications. An organization is customer-centric when it changes a behavior, decision, or action because of the customer. This requires a willingness to be vulnerable as an organization and CEO. However, that leads to a perception on the part of consumers that you are genuine, human, and trustworthy.

- Deanna

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This article was published in the Spring 2013 edition of  The Spread Sheet, a newsletter from the Puget Sound Chapter of the Risk Management Association