In banks we trust: how banks can build belief in the digital age

Trust is fundamental to all relationships. It’s the glue that binds us together. While this is true in all walks of life, trust is especially important in banking.

Management guru and futurist Peter Dixon goes further saying, “In banking or finance, trust is the only thing you have to sell.” While he may be exaggerating to make a point, his message has relevance at a time of great change. This blog considers how banks can build customer trust in the digital age.

Trust is fundamental to all business and personal interactions. Trust can take years to build, seconds to break and forever to repair. Every business knows the key to success lies in establishing, maintaining and growing customer trust. In financial services the need for trust is amplified by the sensitivity of dealing with people’s money, which calls for prudence, diplomacy and empathy.

Why Trust Matters Part 1

Public trust in the financial services sector has increased recently. However, according to the 2022 Edelman Trust Barometer, which spans 16 different business sectors, financial services languishes near the bottom of their rankings, beating out only social media.

Carbon footprint tracking relies heavily on data and modeling. Currently, that data is scattered – but fintechs are well positioned to resolve this challenge. There are fintechs in pockets all over the ecosystem that specialize in products accessing accounting, payroll and SKU-level data with customer consent and through collaboration can deliver better, more accurate products. These partnerships ultimately give us an opportunity to lower the barriers to entry and enable reduction in carbon emissions across the board.

As the financial landscape broadens and opens up, there are foundational shifts that affect the entire industry. Banks face more competition from traditional and increasingly non-traditional sources including digital challengers, neobanks and non-banks seeking to enter financial services. Many potential market entrants have strong established brands and loyal customers. Against this backdrop of change, banks must find ways to increase customer engagement to build loyalty and trust.

Why Trust Matters Part 2

While in-person interactions remain the gold standard for building trust, over 70% of bank interactions are now digital. People do not need to visit a bank branch to transact and are doing so less frequently, usually to seek advice or to complete a journey that began online. Banking has become a digital business, and incumbents must wake up to this new reality.¹

In many cases, fintechs position themselves between banks and their customers and are the customer-facing brand. And trust in fintechs is growing. According to research by EY, 37% of consumers now say a fintech is their most trusted financial services brand, compared with 33% who name a bank as their most-trusted brand and 12% who say they trust a wealth management firm the most.²

Trust becomes more fluid

The nature of trust is changing. Traditionally trust fell into three distinct categories: local – where everyone knew everyone else; institutional – where trust was intermediated and ran through a number of contracts, courts and corporates brands; and distributed – where trust is guaranteed by an extended community without trusted third parties. This is a relatively new manifestation of trust that is receiving growing attention with the proliferation of distributed ledgers such as blockchain.

Although local interaction remains the best way to build trust, transactions banking is increasingly digital. With shrinking branch networks, banks must find ways to build trust in the digital economy. How?

Banks can build trust in many ways, but here we consider the three pillars of competence, customer orientation and character.

Three pillars of digital trust

1. Competence:

• Promote data privacy.As global banking opens up, all financial institutions must use modern technology to ensure robust cybersecurity standards and reassure customers that their traditional trust standards are equally valid in the digital realm.
• 24/7 uptime. Ensuring that customers’ banking services work seamlessly every time, all-the-time is the standard for building trust through demonstrated competence and reliability.

2. Customer orientation:

• Put customer concerns first. Banks have made fraud prevention a priority and invested heavily to keep their systems safe and secure. Fraudsters know this and increasingly target bank customers. Banks constantly monitor fraud patterns and know what the latest and likely scams are. They can build trust by providing customers with advice and guidance on how to avoid fraud and keep themselves safe.
• Embrace transparency and openness. Although banks must harness customer data to increase engagement and to build loyalty, they must also promote openness and transparency about which data they hold and what it’s used for. When using modern tech such as artificial intelligence and machine learning, banks should provide clarity on how their algorithms work and dispel the myth of “black box computing.”

3. Character:

• Demonstrated values. Increasingly, customers are looking to do business with companies that share their values. Banks must ensure that they are adhering to the highest ethical standards as the baseline but taking the opportunity through digital to demonstrate their commitment to supporting community and social causes.

Trust is still crucial in financial services. While the way people bank is changing, banks must strive to increase customer engagement, which in turn builds trust.

Digital technologies allow financial services to be offered exactly where and when people need them to reduce friction, increase convenience and promote customer engagement. Real-time payments, easy-to-use banking apps and buy now, pay later services can drive a step-change improvement in the customer experience and show how technology is a 24/7 brand ambassador in the digital age.

And by providing additional services such as financial education and financial wellness apps, banks can embed themselves into the lives of their customers. Over time, this increases brand awareness and trust to build competitive edge.