Rebuilding customer confidence – turning the corner in trust
Banks and bankers alike have had a torrid time of late: forced into government aid to remain solvent; under constant regulatory pressure to improve risk management; and publicly exposed for their remuneration policies. Worse still a survey by the Co-operative Bank claimed that respondents distrusted bankers only slightly less than politicians. This irony will be of little consolation to beleaguered bankers.
Banks now also face a real competitive threat from both new market entrants and non-bank players who are largely untarnished by recent events. These newer players are more agile in adapting their systems and processes to meet customers' needs.
As new entrants build banking businesses based on the trust they have created, existing banks must rebuild customer confidence to compete and indeed to survive.
There are three ways in which they can do this:
Balancing service efficiency and customer value. As banking services have become more commoditised, the emphasis on personal service has declined. The increasingly transactional nature of banking relationships has improved efficiency, though at the expense of the banks ‘knowing their customer’ in any great depth. Lean principles dictate that banks must offer only those services which their customers truly value. The challenge lies in delivering the basic services flawlessly and cost effectively, while offering customers choice and a 'tailored' experience.
Building trust through transparency. Customers regularly indicate they feel let down by their banks through unfair or unexpected charges, or being penalised for their loyalty. If the banks’ new ‘customer charters’ fail to deliver change, savvy customers will quickly expose false promises and be even quicker to defect. Banks can draw inspiration from other service industries such as telecommunications. Here, providers regularly benchmark their current customer offer against the rest of the market. This changes the dynamic of the relationship completely. The provider undertakes research on the customer’s behalf as an incentive to remain with them. As a result the customer feels valued, and trusts the provider to offer them the best possible deal (not simply that particular bank’s best deal). Through transparency and openness banks will start to rebuild trust. This is the first step towards earning the right to build relationships and sell additional products and services.
Creating a sense of identity and belonging. Transparency and service promises alone will not fully redeem the banks. They must develop lasting relationships with customers who see their bank as a full-service provider and recommend their bank to other potential customers. This again requires change. Traditionally banks focus on attracting new customers, often at the expense of existing customers locked in by the perceived difficulty in switching banks. Banks must also work to create a sense of identity and brand affinity. This goes far beyond simply offering better rates for longer serving customers. A commoditised market will likely spark a pricing war which will claim weaker banks as its victims. Strong, enduring brands must demonstrate clear values and beliefs, deliver on promises, and create an emotional connection.
Ultimately banks who master these three challenges will develop mutually beneficial long term partnerships. Only those that then deliver will be successful. The remainder must face the consequences.
To find out more about building customer trust or to speak with an expert from PA’s finance team, please contact us now.