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Restoring Trust and Credibility in Financial Services

By: VRL
Published: September 2009

 

Restoring Trust and Credibility in Financial ServicesBanking has always had more than its fair share of bad publicity, from unpopular branch closures and the threat to free banking, to persistent coverage of lending practices seen as unfair. And this negative exposure has only increased since the credit crunch.  

Unfortunately for banks, a negative perception of financial services institutions is a boon for many of the alternative payment providers entering into the marketplace. Some of these, for example (perhaps change providers for) telcos and supermarkets, already have profitable, in-depth customer relationships in their existing sectors, and many of them are successfully transferring their approach to the financial services marketplace.

Providing the insight you need to restore customer trust 

As the economic climate starts to steady itself, now is the time for banks and financial institutions to address their customer engagement strategy. Restoring customer faith and trust is critical to ensuring customers are not lost to these new entrants. 

Restoring Trust in Financial Services, the latest industry report from VRL, explains how you can regain your reputation and your customers trust. Brand is not just your company's logo and colours it's about how you engage with your customers, from how you contact them to whether you are offering what they want or need. 

  • Using case studies, market insight and intelligence, Restoring Trust in Financial Services explains the following key points for an engagement strategy:     
  • Understanding customer engagement: why you should use customer engagement as a success measure 
  • Creating a socially responsible operation: people will pay more, and engage more, with a responsible company 
  • Inclusive banking: how to attract business by targeting otherwise underserved customer segments 
    internal communication: why and how improving internal communications improves the customer relationship

Banking and bad publicity have never been far removed, from unpopular branch closures, the controversy over ‘free banking’ and persistent coverage of unfair lending practices. However following the seismic events of the credit crunch, the banking community has been the subject of sustained criticism and scepticism that was unimaginable only a few years ago.

Against this background, there has been a worldwide questioning of the role of the banking industry and many of its operating practices, including:

  • Executive remuneration
  • Excessive risk taking
  • Irresponsible lending
  • A lack of transparency

Governments and industry bodies worldwide have responded to the crisis with a plethora of measures, including:

  • The publication of the ‘stress test’ results on the robustness of finances at a number of major lenders.
  • Legislation on responsible lending (notably card reform in the United States)
  • In the UK a code of practice outlining how large banks, building societies and broker dealers must ensure their  remuneration policies are consistent with effective risk management

LONG TERM DAMAGE TO BANKING?

What makes these events particularly damaging is that while financial organisations have rarely fared well in polls of ‘cool’ or ‘popular’ brands (although many would argue that it is not the job of a bank to be ‘cool’, and the very nature of much of banking is unlikely ever to create feelings of popularity) these events, combined with a new found inability to generate trust suggest a major struggle ahead for the banking industry.

NEW ENTRANTS?

These criticisms come at a point in time when there have never been more well-placed competitors ready to enter the banking space.

These range from alternative payment providers well-placed to challenge the role of the current account. Telcos, who within a few short years have been able to create ever deeper, more imaginative and lifestyle friendly customer relationships across a large range of customer segments. Supermarkets and other established retail providers (not least the postal service) that have already achieved brand engagement with the public and even from consumer themselves, who are able to lend to each other via social networking sites (although this remains a fairly limited phenomenon). Older and established community players, namely the wide variety of mutual players stand to gain additional depositors.

BANKING FIGHTS BACK

The good news is that as the broader economic environment appears to have steadied and confidence slowly returns to the world at large, now, is a brilliant opportunity for organisations to re-engage with their customers.

This report presents the lessons that banks need to learn and the tools at hand to engage customers and establish an environment of trust. Modern branding emphasises the need for creating engagement and establishing an emotional connection in order to achieve advocacy.

Whilst the design and creative of the brand is important, brand is more about the personality of the firm overall.Reputation is key, formed in the mind of the consumer based on their experience and what other people tell them about the company.

This is more important than any mere visual summary of the brand. What the company actually does, i.e. service and product quality and delivery has as much impact on brand and reputation as any marketing communication. Therefore in re-engaging with customers banks need not search for the ‘silver bullet’ but need to be active in boosting their position across a number of customer ‘touch points’ including branch, web site, and perhaps most importantly conversations with staff.

Areas covered in this report include:

  • Steps to creating a socially responsible operation

Socially responsible is no longer a term embraced only by the peripheral, the quirky, or the strident. What was a rather limited business niche 30 years ago, one that catered to a small group, is now a mainstream consumer marketing approach for products that compete head-to-head with established brands. Companies are realising that people will pay more and engage more with a company that is socially responsible.

This section includes coverage of: ‘green washing’, environmentally friendly data management and how to achieve believability and consistency with marketing messages.

  • Building inclusiveness into product design

Although banks use increasingly sophisticated segmentation techniques, there is a persuasive body of evidence indicating that the global female financial market, an increasingly populated, dynamic and affluent one, remains massively underserved. But unlike many industries banks (private and retail), credit card providers and insurance companies have been very slow to proactively target a sector that most, if only informally, acknowledge as a rapid growth area.

In the US, however, many banks are trying to capitalise on this market, including offering a wide range of retail bank services with a strong gender spin. Business banking for women is also an important element of many of the US banks’ service propositions. Issues associated with female retirement are accorded prime importance, with many companies offering one- to-one financial advice backed up by arrange of savings and investment funds specifically marketed as ‘female-friendly’.

  • Communicating effectively with staff

Ensuring that staff understand business goals is the key to them in turn communicating effectively with customers. For financial services an organisation operating internationally, an intranet is the most cost-effective method of cascading timely information to staff. Chapter 3 assesses the approach taken by best practice organisation HSBC in developing a virtual offering and how this has in turn been supplemented with practices including town hall meetings and staff surveys.

  • Improving customer engagement

The use of customer engagement, (defined as Repeated, satisfied interactions that strengthen the emotional connection a customer has with the brand) as a marketing metric is enjoying considerable growth at present.

The advantage of using customer engagement as a metric is that it is a deeper and more holistic measure than customer satisfaction. Proponents of customer engagement maintain that while satisfaction is the foundation and minimum requirement for a continuing relationship with customers, engagement is the measure of the strength of this relationship. Customers that are merely satisfied with the service provided by their bank do not necessarily consider that they have a strong relationship with it.

This section explains why financial services organisations need to embrace engagement as a metric and the role of on line channels in achieving this.

Section I. Product Design  and Operational Strategies

Chapter 1: The Least Served

Chapter 2: Outsourcing versus Rightsourcing: Case Study from Call Centre

Chapter 3: Trust and Respect  Within Financial Services Organisations

Section II. Communicating and Engaging with Customers

Chapter 4: Web 2.0 and customer engagement

Chapter 5: Customer engagement  and web 2.0 in customer service

Section III. Socially Responsible Action

Chapter 6: Socially Responsible Segment(s)

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Retail Banking Products:

Publications:

Retail Banker International
Banking and Payments Asia

Conferences:

Retail Banking and Cards Forum, September 2010, Bahrain (TBC)  
Retail Banking/Payments Innovation, Kuala Lumpur, 11-12 May 2010

Roundtables:

Retail Banking/Payments Asia Roundtable, detailed subject matter TBC, Hosted by Titien Ahmad, VRL Asia-Pacific, and Hugh Fasken, Editor, Retail Banker International, August 2010

Reports:

Bancassurance: The Lessons of Global Experience in Banking and Insurance CollaborationBancassurance
Best Practice in SME Banking - new edition
Branch Banking: Best Practice in the Worst of Times 
Call Centres in Retail Banking - The Path to Excellence 
Consumer Finance in Latin America
Creating Female-Friendly Financial Services: Strategies, Opportunities and Lessons   
Creation from Destruction: Restructuring Financial Services Organisations 
Cross-selling in Retail Banking: Meeting the Revenue Growth Challenge
The Future of Fee-Based Banking Income
Gauging the Effectiveness of Social Media in Financial Services
Indian Retail Finance 
Knowledge, Social Media and Learning in Financial Services 
Maximising Recovery Rates in Consumer Debt Collections - A Global Perspective
Mobile Banking in Emerging Markets                   
Non-Listed Banking Models   
Packaged Accounts                                                                            
Peer to Peer Lending                                                                                      
Post Office Financial PartnershipsPost Office Financial Partnerships
Remittances 2010: Products, Players and Strategies
Remittances at a Time of Global Uncertainty
Restoring Trust and Credibility in Financial Services
Retail Financial Services in China 
Retail Finance in Japan
Retail Financial Services- An Overview
Self-Service in Retail Banking: Developing and Implementing a Successful Self-Service Strategy
Segmentation in Financial Services
Social Media in Financial Services
Strategies for Banking the Unbanked: A Global Market Opportunity
Survey of Global Islamic Finance
The Branch is Back   
The Business Case for Biometrics in Finance - 2nd Edition 
Voice Biometrics - Security by word of mouth 
Web 2.0 in Financial Services