Trust is up – but there’s a long way to go

  • By Peter Jose
  • SAP

Trust in banking remains a key crucial issue for the sector and much has changed after the royal commission two years ago. 

SAP Australia and New Zealand executive general manager, financial services industry, Peter Jose assesses shifting perceptions around trust and the challenges and opportunities for the sector. 

A lot has changed since the last RFi Trust Report, released in 2019. 

The tragic bushfires of last summer hit many customers hard. COVID-19 continues to shake most industries – and their customers – to the core. 

There’s also the impact of the ongoing march of digitisation: one research firm found Australian businesses have adopted a decade’s worth of tech in a year, which in turn has been influenced and accelerated by the pandemic. 

Yet another dynamic is the launch of open banking, which will give customers more choice over their financial services providers. 

This comes at a time when there has also been an influx of neobanks entering the market with offers of price leadership and enhanced customer experience.

The latest RFi SAP Trust in Banking Insights Report, released last month, takes a deep dive into the evolving landscape financial institutions are operating in and the role of trust within it. It explains why banks who move ahead with a customer-centric mindset have the potential to reaffirm their trust credentials and deepen relationships with customers. 

Trust is up – but there’s a long way to go

There’s still a lot of work to be done. On the plus side, RFi Group’s research participated in by more than 150,000 Australian consumers annually, finds that trust in financial institutions now is higher than at any time in the previous 12 months.

However, comparisons with nine other countries show that overall Australians’ trust their financial institutions significantly less than their overseas peers. 

It’s no coincidence that 2020 saw all four major banks start the year with new CEOs. 

Meanwhile, only around half (57 per cent) of customers nationwide are happy with the measures taken by their main financial institution to help them cope with the pandemic.   

Banks and other financial institutions must walk a fine line to balance the needs of the institution and the customer. 

Strong financial performance on behalf of the bank indicates a level of robustness and reassurance but may also create questions about whether the interests of the customer are being balanced with those of the shareholder. 

As of as of May 2020, 56 per cent of Australian consumers had experienced or were expecting to experience a reduction in income due to COVID-19, making this an even more sensitive topic for many consumers. 

Opportunities and risks

The report outlines the key opportunities for financial institutions to affirm their trust credentials in this complex environment - from the importance of reducing fees and interest rates, to making it easier for customers to complete tasks without visiting a branch. 

It also highlights risks which could derail progress. 

In today’s landscape the components of trust are extremely diverse, and it is critical that any review of trust is equally multi-dimensional. 

Considerations range from customers knowing their money will be safe and available when required to knowing that a financial institution will be responsive and flexible when they need support with an issue. 

One of the key takeaways is that we can expect a “dehumanisation of trust” going forward, as digitisation accelerates.

 Personal experiences will continue to heavily influence customers’ perceptions of their financial institutions, but increasingly these experiences will be less influenced by people-to-people interactions within a bank branch and more likely to involve technology that provides greater transparency and empowers consumers to make more informed decisions about their money. 

In this context, digital strengths and shortcomings will become brutally evident.

Being extremely conscious of the fact that trust can be impacted by many varied teams within the organisation – from senior leaders who set the tone; to frontline staff who execute decisions; to product teams who determine if products are transparent and easy for customers to understand; to marketing teams who ensure messaging is clear, well timed, and sets the right tone – is critical to getting trust right.

What’s at stake

Any work to maintain trust and customer loyalty takes place on a more competitive playing field. As just one indicator, 31 per cent of consumers surveyed and 46 per cent of small and medium-sized enterprises (SMEs) say they are interested in using a neobank.

In addition, while awareness of open banking and what it promises for consumers remains relatively low today, certain customer segments – in particular those in their 20s and 30s – see it as an appealing concept once it is explained to them. 

This again raises the spectre of increased competition for banking institutions once open banking is fully implemented.

Faced with evolving customer needs and expectations, deteriorating credit quality and risk, extended stress on financial performance and profitability and difficulty assessing evolving market conditions, banks and insurance companies must focus on building trust, cementing customer loyalty, and acting with empathy. 

The rewards are well worth it. 

RFi’s 2019 report showed that consumers who have a high degree of trust in their main bank are less likely to switch and demonstrate markedly higher levels of satisfaction and advocacy towards that institution. 

Download the SAP RFi Group Trust in Banking Insights Report 2020