Two recent reports show both the contrast and the convergence of the financial services and technology industries.
The 13th annual Edelman Trust Barometer again showed the banking and financial services industries as those least trusted by respondents, while the technology industry topped the list. Separately, Oliver Wyman released a report on the financial services industry entitled “A Money and Information Business”. What can bankers learn from these reports, and how can they apply the lessons to improve trust in banking?
Nearly any public discussion of this topic, particularly one outside the industry, will focus on the need to create strong rules, enforce them swiftly and surely and punish violators. For the sake of discussion, let’s say that those elements are put into place and that your particular firm has a strong culture of ethics and compliance, and strong internal controls. That may help, as 25% of survey respondents perceived “corruption” as a primary cause of the industry’s recent scandals, but will that be enough to rebuild trust?
Not according to Edelman, which lists 16 specific attributes grouped by into five of what they call “performance clusters”, including Engagement, Integrity, Products & Services, Purpose and Operations, ranked in order of importance. In other words, operating fairly, ethically and within the law is necessary (and hopefully obvious), but insufficient to rebuild trust in an entire industry.
Opportunity in Privacy and Security
The lone bright spot for the banking industry on the survey was “ensuring the privacy & security of customers’ personal information”, an area where the tech industry has had a few challenges. Malware, privacy concerns, data breaches and system outages have largely been isolated and contained, but will these areas will need constant vigilance by all industries. But for the most part, people trust technology even more today than in the past, and this is also reflected in the survey results.
Think of the slow initial adoption rates of online banking, bill pay, PFM and other services. The major concern was the sharing of personal data, but this has been allayed for many because of repeated positive experiences by users and by ongoing improvements in technology and security.
Money versus Information
The Oliver Wyman report concentrated on a change in the balance of money and information over the past 20 years. Key characteristics of money in the financial services industry (risk-free rates, the level recent losses and leverage) have moved from high to low, while key characteristics of information (cost of producing and storing, the level of data coverage and the usability to make decisions) have move from high to low.
The result is a long list of opportunities to leverage the power of information to improve profitability, target better advice and offers to customers, better understand client behavior and price sensitivities and assess and manage risks better.
Could leveraging these capabilities in banking help improve the public perception of trust and responsiveness? Maybe. Topping the Edelman list of performance clusters in importance is “Listens to Customer Needs and Feedback”, an area where the tech industry generally seems to be perceived as strong. It is also an area where some in the banking industry have revealed a tin ear. Unpopular rules and practices around overdrafts, debit card fees and foreclosures have met with loud resistance that seemed surprising to some within the industry.
Ben Boyd, global chair of Edelman’s corporate practice believes that the tech industry is perceived as forward-looking, with “competitively priced products that improve the quality of people’s lives”. This is a potential area to build on. Banking products can help make small businesses thrive, help people save for education and retirement, and help finance the purchase of family homes.
Technology can certainly help, but the important thing will be to stay customer-focused and work on solving problems that people care about.
