Why Is My Banker Smiling?
The Erosion of Customer Trust in the Banking Industry (Financial Point of View Paper)
Banks and other financial institutions are facing highly challenging times. Several independent market and demographic trends are working to undermine the competitive viability of business-as-usual strategies. Coming out of the worst recession since the Great Depression, customer trust of financial institutions remains at an all-time low.
New sources of competition for traditional banking activities are appearing at the same time as customer brand loyalty is drastically eroding. All this is occurring at a time when regulatory uncertainties and the long-lingering effects of a brutal recession still cast a dark shadow on the economic near-term future.
Trends Driving Customer Behavior
Most of the industry’s customer segments have no distinct brand loyalty associated with their bank or financial institution because they don’t perceive significant differentiation between financial institutions. The loyalty they do possess is formed more by the inconvenience of switching accounts and services than by any clearly favorable perception of their institution’s brand. Many customers report feeling they are held hostage by their financial services institution; since they perceive all to be the same, they might as well stay with their current institution. With non-traditional organizations—like Google, Apple, and PayPal—starting to offer financial services, customers will have new and exciting venues to consider for their financial needs. It isn’t hard to imagine that banks may start to lose customers to these new sources of competition. It’s time to wipe the proverbial smile off the industry. The customers are now in charge and are willing to jump from their current financial institution to another.
Financial Institution Executives’ Concerns
Executives are concerned about sustaining performance when market conditions are so uncertain. They know they need to:
- Improve customer retention
- Grow their financial partnership with customers
- Offer more products to customers
- Offer more services to customers
- Offer more convenience
- Integrate the experience of all channels
Financial institution executives are concerned that as their customer segments diverge, the consistency of the brand suffers across channels.
Forward-thinking executives understand and embrace the challenges faced by their institutions because they see huge opportunities available to those that can focus on building a consistent brand experience that:
- Reverses the current erosion of customer trust
- Attracts new customers and retains current customers
- Deepens the customer relationship by offering additional products and services across all channels
- Integrates customers’ experiences of all channels
As more and more people use technology to interact with their financial institutions, the need for a consistent experience across all channels is critical. Banks and institutions that truly provide a differentiated experience know that their people are the key to providing an experience that’s second-to-none. Technology will continue to evolve and provide new ways for customers to interact with their institutions, but the winning organizations know the power to build customer trust starts with people who interact with the customers.
Build Customer Trust
In order to attract new customers and retain existing customers, institutions need to address the widespread erosion of customer trust. Those that can reverse this trend by aligning each and every interaction across the customer experience to consistently increase customers’ trust hold a reliable source of competitive advantage.
Two things are necessary to build a competitive advantage from the customer experience. First, leadership must provide vision and commitment. And second, the organization must develop and deploy a core competency in establishing and increasing customer trust in each channel of customer interaction.
Even while customers are using the services of one bank, they are constantly reevaluating their current relationships through the collection of various input that forms their impressions and sets their expectations. They continue forming both logical and emotional judgments that reflect how attracted they are to any given brand and whether or not they’ll continue using their current institution. Their expectations are not just built on your marketing or advertising. They are created based on their service experiences across all brands and all industries. Financial organizations must realize they are no longer just competing against the branch across the street but with everywhere their customers shop.
Trust = Credibility + Empathy
Credibility is the customer’s logical assessment of a financial institution’s capability and reliability for delivering what is needed. Empathy is the emotional connection that enables associates to establish a high level of rapport with customers by understanding the emotional component of their financial and personal needs and expectations.
Our research shows that customer perceptions of trust are determined by four supporting concepts; the first two address empathy and the last two address credibility.
- Commonality: Refers to the customer’s perception that you both hold things in common—interests, beliefs, and values.
- Intent: An open declaration of your interest in the customer’s success and well-being.
- Propriety: Expectations of business customs and the ability and willingness to meet the customer’s behaviors.
- Competence: The perception you create in the customer’s mind that you have the capability and experience to help solve the business problem.
In each interaction with each channel, customers are forming and re-forming their assessment of trust, perceived value, and willingness to do business with a given financial institution.
In the world of financial services, the requirement that trust be at the heart of every customer interaction doesn’t vary by channel or trend.
Many institutions and banks tend to focus on and develop the “back wheel” or “hard skills” of the credibility side of the equation at the expense of the “front wheel” or interpersonal skills of the empathy side of the equation. Back wheel competence in transactional efficiency and operational and technical capability is necessary but insufficient to reliably cause customer trust to grow.
Leading institutions understand that customer trust grows most profoundly from the “human side” of the equation. By helping associates gain competence in the skills that demonstrate empathy, they are placing their workforce in service to their own customers’ financial goals, helping customers to increase their trust in the institution and leveraging that growing trust into stronger revenue generation.
What It Takes
Aiming every customer interaction at building trust requires more than customer service charm school. It takes vision, widespread commitment, and alignment within the entire financial organization.
- Be the source of a compelling vision for excellence all across the customer experience
- Develop strategy that funds and aligns operations with serving the customer experience
- Provide consistent communication
- Hold managers accountable for performance
- Manage to specific performance benchmarks that support excellence in the customer experience
- Provide communication, training, staffing, and operational support
- Evaluate, coach, and support associate performance across the retail organization
- Demonstrate buy-in to the strategic vision
- Acquire and practice new skills
- Demonstrate commitment to improving individual performance
- Understand their role in producing or enhancing customer trust at every interaction
Reversing the Erosion of Customer Trust
The customers of financial institutions are ready for a change in the way they regard their financial institution. Those institutions that reevaluate, refocus, and realign each channel of customer interaction with the aim of building customer trust will gain a competitive advantage over other financial services institutions. They will be better able to withstand and win in the face of competition from the entry of non-traditional providers of financial services.
Financial institutions must realize the power has shifted. Customers will continue to adopt new technologies and become more sophisticated about managing their financial futures. They are demanding their banks and other financial services companies serve their increasing financial fluency by providing information and guidance, in addition to being a multi-channel provider of reliable financial transactions. That way, the smiles our bankers provide are genuine and customers will have a greater trust and willingness to deepen the relationship.
How Wilson Learning Can Help
Wilson Learning guides organizations to success by inspiring, developing, and transforming their greatest investment—their people. We help our clients navigate the complex path of creating solutions that will enable them to achieve real business results. For example:
- Major financial services company improved its call center customer experience, saving $13 million a year
- Large regional bank’s differentiation efforts resulted in a 4:1 return on investment
- Major Canadian bank created a competitive advantage in the marketplace by developing a brand experience that drives a consultative sales culture
Our work frequently guides organizations by integrating their culture, brand experience, service, and sales through simple, elegant, and highly customized performance solutions.
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