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Study Shows Consumers Distrust Banks More Than Any Other Industry

Less than half of the public trust banks to do what is right, making financial services the world’s least-trusted industry for the second year in a row, according to an annual survey by public relations firm Edelman.

The study, conducted by research firm StrategyOne on behalf of Edelman, involved 20-minute online interviews with 30,000 people in 25 countries. Edelman describes participants in the survey as members of the “informed public” — college graduates whose household income is in the top quartile for their age, and who follow newsworthy issues several times a week.

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Consumer Confidence in Banks Nosedives in US, UK

Since 2008, consumers’ confidence in banks’ ability to “do the right thing” has plummeted — a stunning 46% in the US, and an equally-shocking 30% in the UK. Meanwhile, in other markets like India and China where consumers already have high levels of trust, faith in financial firms’ integrity has increased as much as 12% over the same three-year period.

Respondents ranked “has ethical business practices” (76%), “listens to customer needs and feedback” (74%), and “places customers ahead of profits” (73%) as the most important actions financial firms should take to rebuild trust.

31% of consumers think more regulations are needed to curb irresponsible business practices. 25% want more the government involved to ensure companies are behaving responsibly.

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Edelman says the concepts of trust and reputation are inseparable. A financial institution’s reputation (i.e., its brand) is a consumer’s aggregate feelings about its past behaviors. Past performance creates future expectations, which in turn determines the degree of trust a consumer places in an organization.

The Financial Trust Barometer, now in its 12th year, seals Edelman’s position as one of the world’s foremost authorities on reputation tracking in the banking sector.

Trust in Banking by Country

Consumers in the U.S. are more trusting of financial services brands than many other developed countries, however, the industry is only trusted by a majority of consumers in nine of 25 countries studied.

Food For Thought: How many financial institutions have the word “Trust” in their names?

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A report released earlier this year by consulting firm Oliver Wyman found that 63% of people trust no one but themselves to manage their retirement savings. Banks were trusted by less than 8% of those surveyed in the U.S. and U.K.

In order to regain trust, banks will have to offer simpler products that appear to offer value for money, according to the Oliver Wyman study. To do that, lenders and insurers will probably cut one-quarter of their costs over the next eight years by delivering products online instead of through branches.

Do What You Say, Say What You Mean

“The financial crisis and its persisting issues of banker bonuses and sovereign debt defaults have highlighted issues of moral bankruptcy in our current way of banking,” observes Omar Shaikh, executive board member of the Islamic Finance Council UK.

Richard Edelman, President/CEO at Edelman Worldwide, says there has too often been a divide between what financial institutions do and what they say. “It is not good enough any more to say smart words. You have to have smart deeds.”

Martin Shaw, chief executive at the Association of Financial Mutuals, says banks frequently respond to breakdowns in trust by throwing money at new branding projects. “But actions inevitably speak louder than words,” he says. “But all too often you hear that customer benefits are cut, whilst the [shareholder] dividend is increased.”

Branding guru Steve Davies says trust is born from a sense of congruity. “Put simply, ‘saying what you will do, and then doing what you say.’”

That doesn’t mean you have to open the kimono and be brutally honest, Davies says.

“Transparency is a term that’s sometimes overused,” he complains. “It doesn’t mean opening the doors and revealing every secret. The simple reality of doing business makes telling the truth an unrealistic proposition.”

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Comments

  1. “Edelman describes participants in the survey as members of the “informed public” — college graduates whose household income is in the top quartile for their age, and who follow newsworthy issues several times a week.”

    Not exactly a representative sample. Can’t imagine why Edelman would have done that.

    I do, however, applaud Edelman for wording the question the way they did (“how much do you trust banks to do what’s right?”). Too many surveys simply ask “to what extent do you trust banks?” leaving the respondent to interpret the “to do what?” part of the equation.

    On the other hand, once again, the results may be somewhat misleading. After all, how in the world can respondents know whether or not banks they’ve never interacted with do what’s right?

    In the research I’ve done, when we’ve asked consumers to what extent do they trust THEIR PRIMARY BANK to do what’s right, the numbers are significantly higher — like double — than the percentage who say that BANKS IN GENERAL do what’s right.

    Many people are likely to see these results and misinterpret the findings. I hope Financial Brand readers don’t fall into that trap.

  2. Not buying this sale says:

    Sorry, but this article and study are both, eh, crap. If the cheese product industry were denigrated over a period of time, they too would be seen as the evil doers. I expect my bank to make sound business decisions, as I expect all the business I spend money at. Unless of course, we are speaking of the news sites I visit. I expect those ‘people’ to cut their own throats.

  3. So cheese makers are getting a free ride, and all the negative press banks get is the result of bad luck and unfair treatment by the media?

    The banking industry does a pretty good job denigrating itself. There are, after all, dozens of marketing campaigns from banks every year reminding us how impersonal, silly, bureaucratic, stuffy, deceptive, cruel and greedy banks can be… It’s supposed to be funny, a parody. Banks mock their competitors then say, “But we’re not like that!” The Financial Brand has said before: If you spend enough time telling consumers how lousy you’re industry is, they’ll eventually believe you.

    And then, of course, there are big players like BofA who send a bad message about the entire industry. What about investment banks with their MBS and CDS? They have no responsibility for the image the financial industry now has today?

  4. Great findings which are in line with many other research studies about trust in banking. Still, the industry did not really awake and think, that time will cover this matter…

    … which it will not

    Kind regards from Germany

    Hansjörg

    PS: I could not find the pic about trust by county in the Edelmann research. Is that from another source?

  5. Joe Schmigotz says:

    Editor – “What about investment banks with their MBS and CDS?” Therein lies your problem. Nobody in the media has done a very good job of decsribing the differences between a commerical bank and an investment bank.

    In addition, the earlier point about respondents commenting about their primary bank are spot-on, making this survey only marginally interesting.

    Finally, only Ally and a handfull of other banks openly disparage their competitors. The advertising campaigns I’ve seen are asking to be a PARTNER to the consumer, not a babysitter. A reasonable part of all this is consumers who chose to not be informed and learn about their own financial business.

  6. Amy Davis says:

    As a credit union industry, we should start looking more carefully at these types of studies. If you find this one flawed, fine; Google another one. Consumer satisfaction ratings, corporate ethics, CSR studies, there are a myriad of research studies out there that clearly depict a transition in consumer thoughts and perceptions surrounding banks.

    Big Bank now = Big Oil. As a nation, we felt banks were too big to fail. Now, they’re too big to care in America’s eyes. It’s time to show a choice – demonstrate what the heck a credit union is. Invest in your brand, communicate your brand and be genuine and ethical in your community. People are watching and they do care, more than they ever have.

  7. Joe, the study addressed both “banking” and “financial services.” Both investment banks and commercial banks could be considered members of each group. That bankers see a clear distinction between the nature of these kinds of financial institutions, there is no doubt, but consumers don’t know/don’t care. The bottom line is that consumers lump all financial institutions in the same boat, whether that’s fair or not, whether that’s the media’s fault or not.

    While you may only see “a handful” of bank-bashing campaigns every year, The Financial Brand sees no fewer than 50 (there are currently three running on TV in my local market). And this is a trend sustained over decades. While not a primary cause of negative bank perceptions, it certainly doesn’t help.

    There are a few, basic fundamental questions here:
    - Is there an issue of trust in the financial industry?
    - If there is an issue of trust in the financial industry, are banks responsible?
    - If there is an issue of trust in the financial industry, should banks do anything about it?

    It sounds like your answer to all three questions is “no.” Consumers clearly disagree, as study after study has shown.

    Ultimately, the financial industry is accountable for whatever reputation it has today — good, bad or otherwise. Blaming consumers and the media suggests the industry has no responsibility, played no role in the image it has today. Every person, every brand and every industry possesses the most control over what others think of them.

    The choices are pretty simple: If you are okay with what people think about you (or believe their opinions are unimportant), then make no changes — proceed as-is. If you don’t like what people are saying, then changes will be required.

  8. Hansjörg, you can find the chart breaking down trust in the financial sector by country on Slide 5 in this Edelman presentation. The Financial Brand usually rebuilds graphics from reports for two reasons: (1) to honor the publisher’s copyrights, and (2) to properly format graphics for the web/site.

  9. Joe Schmigotz says:

    Editor – “That bankers see a clear distinction between the nature of these kinds of financial institutions, there is no doubt, but consumers don’t know/don’t care.” That is exactly my point. How can you consider the study statistically valid when you acknowledge that those surveyed (probably) don’t understand the difference between and investment bank and a commercial bank?

    I don’t want to walk down the path of debating who was “at fault” for the financial meltdown but certainly, even reasonably informed consumers, heard the term “bank” used in general and never made the distinction.

    So to answer your questions in order: Yes. Somewhat. The answer to the third question is I think where you were going with your article in the first place. I’m not sure the banks can win that battle. The only remedies as I see are time a general economic recovery.

  10. If you want to chalk up the financial industry’s black eye to an unfair association with investment banks, go ahead. I guess we’ll just have to disagree on the impact things like overdraft reordering and universal default clauses had on consumer perceptions of banking. Sorry the study irritated you, Joe. I’m sure there will be more like it in the future.

  11. Bank Free since 1991 and LOVE it! I operate on CASH ONLY with no exceptions and I own everything out right. The only damn monkeys on my back are health insurance and government, but overall I extremely HAPPY!

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