Special Feature: Trust

When it comes to a strong relationship between a bank and its customers, trust and loyalty lay the foundations. Without them, customers will cash–in their financial institution and consider the alternatives.

A recent report has underlined concerns that a growing gap exists between financial institutions relationships with banks. According to Forrester Research’s ‘Building Stronger Customer Relationships’ only one third of consumers say they trust their financial institution to treat them fairly. The bond that once existed seems to have diminished, as faceless modern technology replaces the ‘human’ element, and the customer experience falls short. As a consequence, customers now feel a much weaker allegiance to one bank and when it comes to getting the most from their money, are more likely to shop around for financial products and services.

Despite overall satisfaction in banks rating highly and existing current account relationships appearing secure, the report highlights how the sales of additional products are more fragile.

“In many European countries, consumers have partially lost the trust they had in these institutions,” says Daniele Bonfanti, Programme Manager Financial Insights EMEA, IDC. “I wouldn’t say there’s a huge gap, but that gap is widening and for this reason banks, watchdogs and industry associations have started initiatives to reduce or close it.”

Looking after their own
Unappealing to customers is the widespread belief that many firms appear first and foremost to do whatever is best for their own bottom line. “There is a sentiment that banks are not doing acting in the best interest of the consumers all of the time,” continues Bonfanti. “Rather, they are doing what is likely to benefit themselves and their profits. This is perhaps a sentiment felt more strongly with respect to banks than to other types of company.”

This kind of breakdown can have a detrimental effect on banks, culminating in the worst-case scenario of losing customers to a competitor. The bank may also acquire itself a negative image, the mal effects of which may not be as instantly noticeable, but that can in the longer-term jeopardise a bank’s valuable position in the market.

Despite the hassle associated with switching banks, if customers are unhappy with the service they are receiving, they don’t rule the option out. “Consumers’ perception of switching to another bank is that it is not a very straightforward thing to do and that it requires a certain amount of effort. It takes time and annoyance for a customer to make the decision to switch, but it can eventually happen,” warns Asaf Buchner, Associate Analyst at Jupiter Research. “Word might also spread, resulting in a bad reputation for the bank, which can make potential customers think twice before opening an account with that institution.” Buchner believes that, although a customer might still be retained by the bank, they might be more inclined to shop around for any extras. “While the customer might continue to bank with you,” says Buchner, “they may not purchase additional products – and the sale of additional products is like the holy grail of banking.”

Hanging on the telephone
There are a number of reasons for this apparent breakdown in trust, most crucial being the progressive loss of the ‘human’ element. For most, the days of traditional branch banking are creeping to a close, with growing numbers of customers conducting their banking via the internet or over the phone, rather than face-to-face. Few will be on familiar terms with bank staff. “In recent years, the subjective assessment and understanding of people’s circumstances has been replaced by a series of mathematical calculations on a computer,” says Derek Williams, Creator of The Wow! Awards. “I believe that most customers are disappointed by the idea of dealing with a faceless individual by telephone, who will make a decision purely based on the criteria on their computer. It’s not about business-to-business or business-to-consumer – all business is person-to-person. It doesn’t matter how good technology is, there will never be a substitute when it comes to basic human psychology.”

Internet and phone banking have become extremely popular in recent years, making it quick and easy, for instance, to check an account. However, it can also be very frustrating for customers, particularly when they are phone banking and want to speak to an operator. Instead they often have to go through an Interactive Voice Response (IVR) system or similar, which doesn’t provide any human interaction.

While an obvious benefit to the bank is the cost savings, it may also be sacrificing good customer service. Callers may be left hanging on the line for ages trying to get through or are unable to speak to the correct person in authority to make a complaint. Recent research has indicated that the average amount of time a consumer is prepared to wait for before hanging up is 65 seconds. “I don’t think many consumers like IVRs and there is some dissatisfaction about having to go through so many steps to speak to a person,” argues Buchner. “Improving the IVR system and letting the consumer choose if they want to speak to an agent or use the automated system is preferable.”

And, while online banking is extremely convenient for many customers – enabling them to check the status of their accounts and transfer money at any time of the day – it also has its limitations. For instance, the website may be difficult to use or, on occasion, have technical difficulties meaning access is denied. Recent research conducted by software vendor, Compuware, reveals that 94 percent of European retailers and financial institutions fail to comprehensively manage their online customer experience. Added to this, the results showed that poorly performing transactional websites are costing a third of retailers and companies in the financial sector across Europe approximately UK£500,000 per year. Only 43 percent of customers questioned said that if they logged onto a site and it performed poorly they would re-visit it. As a result, online banking may not be the best way to build up long-term loyalty with a particular bank. “To build a strong, lasting customer relationship you need to have a long-term view,” explains Bonfanti. “This is particularly important with the increasing usage of online channels. Without an in-person contact with consumers, banks have lost the ‘human’ element of the relationship. As a consequence, they have less control over the irrational part of the relationship, which is built on human touch.”

Seeing clearly

A lack transparency is another underlying factor in the breakdown in trust. Customers are increasingly disgruntled with banks that fail to be as ‘open’ as they could be when providing information. According to the Forrester report, banks that don’t hide details about the fees and charges away in the small print have far better relationships with their clients. Customers appreciate having the whole picture rather than a fragmentation, so tend to be impressed if their bank is also knowledgeable about the rates and charges other banks charge on their products.

The research also identified that banks that, amongst other things, listen to their customers and act benevolently are favoured. Rabobank in the Netherlands has been very proactive in this area, helping older clients to change over to use of ATMs. The company uses retired ex-employees to demonstrate how to use ATMs with care and understanding. Receiving advice from someone more on their own level and who is sympathetic to their concerns is reassuring to customers.

Raising their game
A number of banks are now beginning to realise the potential value of improving their customer service and are acting accordingly, even if at the expense of gaining additional revenue. “Some banks are offering customers alerts, which warn them about late fees or if they are going below balance,” says Buchner. “In doing so, the banks are actually losing potential fee revenue as a result of advising the customer before the fee generating event is going to happen. Banks I’ve spoken to said they knew there would be costs associated with this, but decided to do it anyway because they cared about their customers. Also they realise that in the long term being less greedy and demonstrating to customers that they do things for their good will pay off.”

Indeed, this attitude is being readily embraced by the more ‘clued-up’ financial institutions who have caught on to the idea that consumers are attracted to firms that do their best for their customers rather than simply their own interests and profits. “It’s not all doom and gloom,” enthuses Williams. “There are new organisations coming into the market that appreciate what customers are looking for and they have found ways of merging customer service with technology. It is these banks that are winning the business.”

Investing in rebuilding the valuable consumer-FSI relationship should now be the priority of banks. Business relationships have to be nurtured in order for them to grow and remain strong. The bottom line, therefore, is that banks willing to improve the customer experience are far more likely to reap the rewards in the long term than those where cost reduction, but less customer satisfaction, is at their core.