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07/24/2017

Sustaining customer trust amid anticipated deregulation

Barry Adcock July 24th, 2017

It’s probably fair to say 2017 will see the easing of at least some banking industry regulations. From an executive order that could target Dodd-Frank to campaign promises to ease regulatory burdens on the industry, the Trump administration seems poised to deregulate. While many in the industry may view the prospect of fewer regulations as a boon, how will bank customers see it?

Will anticipated deregulation further undermine the already-tenuous trust between customers and financial institutions?

The trust gap

Without question, a trust gap exists between the banking industry and American consumers. More than three-quarters of American consumers don’t completely trust banks to offer unbiased advice, according to EY’s 2016 Global Consumer Banking Survey.

2016 Gallup poll found just 27 percent of those surveyed expressed trust in banks. While that percentage is the highest Gallup has found since the 2008 financial crisis, it was still a percentage point lower than in 2015. The highest trust Gallup has ever polled for banks was 60 percent in 1979.

What’s more, there’s evidence the public already mistrusts the relationship between banks and regulators. In early March, a Pew Research Center opinion poll found 49 percent of Americans say the federal government hasn’t done enough to regulate financial institutions. And while it may not be surprising to learn respondents to the Pew poll split along party lines, with more Democrats than Republicans feeling more needs to be done, it’s worth noting that nearly a third of Republicans also said regulations have not gone far enough. Further, Pew found that college-educated consumers and millennials were more likely to feel regulation of the financial industry hasn’t done enough.

Perhaps the most concerning news of all came from the Chicago Booth/Kellogg School Financial Trust Index, which found nearly half of those polled for the index oppose the elimination of Dodd-Frank, and 11 percent had no opinion. Again, respondents split along party lines.

“However,” the report notes, “even Republicans show doubt that (the appointment of billionaires to key cabinet positions) will help the economy work ‘in the interest of all Americans,’ with just 63 percent of Republicans backing that statement, and even fewer Democrats (26 percent) and Independents (30 percent) agreeing.”

Public perception that the banking industry is “in bed with” regulators, and working toward its own self-interests, rather than what’s best for consumers, could further erode trust between consumers and their financial institutions.

Why it matters

Any business, from a florist to a financial institution, is selling more than just a product or service; they’re also selling their reputation. In the banking industry, a positive reputation — driven by consumer perception — is a highly profitable asset.

Trust leads to engagement and Deluxe’s own research illustrates that engaged customers are more profitable ones. Engaged customers are satisfied with their banking experience, and are more likely to purchase new products, use online tools and remain with their primary financial institutions longer.

What’s more, customers who feel a high level of trust for their financial institution are also more likely to recommend it to others. These referrals can drive customer acquisitions and significantly affect a bank’s bottom line.

Sustaining and rebuilding trust

Sustaining and rebuilding customer trust through probable deregulation will require both a systemic focus and precise, issue-specific initiatives, including:

  • Continue to emphasize and incentivize a customer-focused culture throughout your organization. Establish and clearly communicate customer service standards for every level of your bank. Reinforce this emphasis by rewarding employees who model desired customer service behaviors.
  • Communicate with consumers about what regulatory changes mean for them. Because so much is up in the air right now about potential deregulation, don’t speculate. Limit your communications to what has actually happened, when it happens. Do so in a clear, concise manner, stating only the facts. Avoid verbiage in communications that appear to “sell” the changes; American consumers are savvy about sales pitches and overt selling will automatically dial down their trust levels.
  • Leverage your loyalty program to remind customers you value their business, and want to reward them with relevant offers and rewards.
  • Update consumers on products and services impacted by deregulation, if and when it happens. Again, be clear and simple in your explanations.
  • It’s not yet clear how potential deregulation might impact data security regulation if it does at all. However, no matter what the federal government says banks must do — or don’t have to do — to protect consumer information, customers will certainly expect their financial institution to protect their data. Continue to focus on information security, and find relevant opportunities to communicate to customers how your organization protects their information.

In the aforementioned Gallup poll, banks ranked ninth out of 15 institutions to which Americans give their trust. The industry ranked far below the military (No. 1), small businesses and the police. Still, it was well ahead of Congress, which ranked dead last. The jury’s still out on whether public trust in government will ever improve, but the trust gap between banks and customers can definitely be narrowed — if not for the industry as a whole, then certainly for individual banks and branches.