Banks, Consumers and Trust

By Pat Allen

Our panel of leading retail bankers considers the challenges and opportunities of continually earning the customer's trust.

As is abundantly clear elsewhere in this issue of Banking Strategies — whether the subject is front-line execution, relationship-building or keeping pace with payments preferences — success with the retail customer is the result of focused effort, significant resources and constant monitoring. Not tobe taken for granted is what's at the bedrock of a bank's relationship with its customer: trust.

The year 2004 will be remembered as a year in which there have been some new challenges to the consumer's trust in banks. Online and offline fraudsters stunned unsuspecting customers and banks alike by faking official communications and stealing customer identities. Apart from phishing attacks and perceived privacy compromises, there was suspicion fueled in part by consumer advocacy groups surrounding the impact and communication about Check 21. And, consumer trust continued to be tested by some ongoing issues, including:

• Pricing and other tension points
• Ongoing fallout related to mergers and acquisitions
• Inadequate or flawed service or communications

Many have weighed in on the subject of consumer trust, particularly in financial services organizations. Consumers have been surveyed, consultants have studied the subject and produced their research and observations. On the next few pages, you'll read the thoughts of a panel of retail banking leaders. What's the state of the consumer's trust in banks? Has there been a meaningful erosion? Can an individual organization take steps to earn above-par trust? What does a customer's trust enable?

Neither blasé nor unduly concerned, these leaders strike a proud but mindful tone as they discuss ongoing efforts to preserve and build on what is unquestionably the industry's greatest asset.

Banking Strategies: Let's start by asking each of you for a baseline on what consumer trust means to you, to your organization and to your industry.

Bagby: Trust is really a front-and-center issue for us at AmSouth. And that has certainly been heightened in the last year.

About a decade ago, we invented what we call our six basic values. They're very simple Golden Rule-like values that we stress in every way throughout our organization.

We built upon that with some real practical things, such as our code of conduct, which is reviewed periodically. We also have a thorough communication plan built around customer privacy issues. The fact that we have a culture built on these basic values really frames up the importance of trust in this organization.

Kirby: Trust is clearly something that we focus on here at SunTrust. I wouldn't say that we have positioned the specific concept of trust as a measured metric, but it manifests itself in our focus on overall service quality, on getting the right products to our clients, and on acting generally in the clients' interest. So while we have not launched a specific initiative zeroed in on trust, the concept of trust weaves into what we do on a daily basis and how we run our branch network.

Olan: I think trust is just another word for confidence. So we try to look at it from two levels.

First of all, our customers need to know that our intent is good and our track record tends to tell them that. As long as they can see, on an ongoing basis, that we are fulfilling our promises, that instills trust.

The other level is: can we execute on what we promised? We spend a lot of time making sure we can execute on what we promised so there isn't a breach of trust.

Elmore: Trust is something that you earn over a period of time, and I think you have to look at it from an industry perspective before you can really look at it from the standpoint of a specific organization. Banks historically are held in a higher esteem than other financial service providers. I think that's because of the service that we've provided through good times and bad. The older generation especially remembers bank closures and the S&L crisis, for example. They know the bank is going to be there and live up to its obligations to customers.

Looking at it from an individual bank perspective, we do have what we call a "service advantage" where we commit to living up to certain standards in our customer delivery. And if we don't meet those standards, we try to make it right from the customer's perspective. Once you consistently deliver to the standards that you set, you end up having customers who develop greater trust in your organization. So it comes down to executing consistently.

Banking Strategies: What banks have with their customers is a relationship, and all relationships have ebbs and flows. Given the recent challenges, are we at an ebb currently?

Olan: Given some of the scandals going on, there's a lot less trust not only industry-wide, but also corporate-wide. We carry our own share of the baggage, if you will. But I don't know that we are more or less trusted than any other industry at this point.

Elmore: Certain industries are probably dropping significantly further than banks. I think banks tend to ebb and flow within a fairly tight range.

Bagby: The whole corporate American scene is under a microscope right now, whether it be Enron or WorldCom or others. People are out there generally saying, "What's up with corporate America and are they good guys or just greedy people?" I think we're lucky to be in the banking industry. I bet research would indicate banking is one of the most trustworthy industries out there. Part of that is the form and nature of what we do. And part of that is we've been a highly regulated industry and have always concentrated on being fair and precise with our customers in terms of our accounting and compliance with laws and regulations.

Kirby: I would say there has been some slippage in the trust of our industry. But consumers may have a different perspective when they talk about the trust of an institution in total, compared to the trust they have with their relationship manager. That's why we all strive to really build those one-on-one relationships, whether it's a commercial account manager dealing with a commercial client, a wealth advisor dealing with an investor, or a branch manager dealing with branch customers. At the end of the day, our success is tied to the job these front-line employees do in building that sense of trust with our customers.

Olan: The key there is to offer that methodology consistently across the enterprise. You can't have pockets of people that are trustworthy and others that customers aren't quite sure about. One thing that has eroded some of the trust in the industry is the question: will you be there tomorrow? I hear this all the time: when are you going to be bought? We constantly tell our customers we have no intentions to merge or get bought. But when they see all the other things happening in the industry, they're just not sure what to believe.

Banking Strategies: Does the trust that your customers have in you give you license to deepen the relationship and sell other products? Can you actually act on that trust that you believe you have?

Elmore: To establish trust, you have to be in the relationship business. If you've established that trust with somebody, you should be exploring avenues to make sure you're providing all of the services that your customer would want and/or need from your company. That's a critical component. If you haven't established that trust, you're just pushing product, which isn't an effective long-term strategy.

That's why trust is such a critical component of long-term success if you're in the business of dealing with relationships as opposed to just pushing product.

Olan: You're actually irresponsible if you don't utilize that trust to help the customer. Sales is nothing more than proactive service. You've got to make sure that you're utilizing whatever level of relationship you have with a customer to either build additional depth in that trust and/or to provide solutions that can help that customer over the long haul.

Bagby: We have a mantra here at AmSouth, which is: understand needs, meet needs, and build relationships. We relentlessly communicate that theme to our employees because that's how we add value and develop dimension to our relationship with customers.

Banking Strategies: A recent study from Yankelovich said a customer's trust is more strongly shaped by direct personal relationships as opposed to indirect channels. As banking channels become increasingly indirect — the Internet and ATMs, for example — does maintaining trust become a challenge?

Olan: There has to be a track record of successful implementation of these additional channels. As your customers see you introduce new opportunities for them, you're continuing to massage their comfort level.

The sad part is the fraud. We, as an industry, have to do a better job of educating the public at large about those problems. And within our individual companies, we need to do a better job of communicating with our customers. By pointing out the dangers, we'll gain additional trust.

Kirby: The recent increase in identify theft and phishing incidents with e-mail is a big deal because customers rely on us to keep their information private and maintain the right security protocols. We're in new times. We all go through airport screening. We know what Orange Alerts are. We know that there are certain threats to our privacy. I think our customers expect a certain amount of education and guidance from us in terms of how to protect themselves. However, when it comes to security problems with e-mails and online banking, it's a bigger deal for a bank than some other retailers.

Olan: My sense is that we tend to look at things the way we do because of the times we're living in. Are we looking at the phishing incidents differently from the way our predecessors looked at the bank robberies in the 1880s or the banks failing in the 1920s or the check fraud issues of the 1960s? These are the fraud and trust issues of our time, and we're feeling these with the same intensity as bankers felt those issues in those times.

Banking Strategies: How do you measure customer trust?

Bagby: Indirectly. We measure service quality, of course. Then we measure loyalty, which is the propensity of our customers to view us as a valued, trusted resource, and their propensity to think about leaving us. This research technique gives us an index of customer loyalty and trust.

Elmore: It's true that service quality does not directly relate to trust. However, meeting customers' expectations and measuring their satisfaction provides an indirect indication of their trust level. So we pay a great deal of attention to that. As I said, when you're in the relationship business, you have to have the trust factor if you're going to be successful long term.

Olan: That's a great point. One of the things that we ask is whether the customer would refer a friend to the bank. We measure that every year. If we were to see that number going in the wrong direction, we'd know that we either have a trust problem, or an operational problem that we need to look into.

Banking Strategies: But none of you tracks trust as a separate category?

Olan: We don't explicitly.

Bagby: We more or less do with this loyalty measure, to the extent you could equate the two. But we don't go out and say: do you trust us?

Banking Strategies: When you see the loyalty measure dipping in the wrong direction, what sorts of interventions are possible to reverse that trend?

Bagby: You can start with the broadest set of interventions, which are cultural adjustments. Are the company's basic values not understood? Then, you can go on down to the next level and ask some questions: Is there a people problem? Is there a process problem? Is there an operational breakdown? Is there something in how we're conducting our business that's affecting the level of trust our customers have in us?

Elmore: We have pretty detailed reporting so that we can see exactly where an area is starting to have difficulties, internally or externally. Obviously, if your numbers suggest a problem in one location, or in one particular part of the organization, then you apply all your efforts to see what's causing the aberration. Having a very good reporting system is essential to make sure that you are performing at the level that you need to.

Banking Strategies: How do you track employee trust?

Olan: One of the simplest ways is making sure that people feel they have access to you. Having access to executive management builds a bridge. The more directly you communicate to them, the more trust they will feel.

We also do employee surveys. We were recently rated as one of the ten best places to work in Houston by the Houston Business Journal. You can look at those results in the same way as you can look at customer information.

Banking Strategies: So if you can measure it, you can manage to it, so you can commit to having a more trustworthy institution. Is that the conclusion?

Bagby: You get what you inspect.

Banking Strategies: What, then, is the economic value of the fact that your customers trust you?

Olan: Product and service usage are really need-driven. That means the bank has to be the trusted resource at the point in time when the customer realizes they have a need. So trust enhances the likelihood that the customer will choose your solution when they need one. That's where it impacts profitability.

Banking Strategies: Has anyone else been able to draw a correlation between loyal customers and more business?

Bagby: I can say this: our retention of high-revenue customers and multi-service customers is far superior than our retention of single-service customers. Intuitively, that means people who use you more and give you more revenue probably have a better, fuller, more trust-worthy relationship.

Kirby: Clearly, there is a correlation between trust and overall relationship profitability. Have we gone through and done any detailed analytics to match up trust as a factor in customer purchases? No. But there is clear evidence that relationships with the most accounts are the most profitable. And typically, those are the ones that have been around for the longest time, so there is an implied correlation to profitability.

Banking Strategies: Is it possible to differentiate on the basis of trust — to actually win business from other institutions that are also FDIC-insured and -regulated businesses? Is there an opportunity here?

Bagby: I never thought about it in that way. We think about differentiating in terms of service, or responsiveness or knowledge, but I never thought about it in terms of differentiating in terms of trust. I think of trust as more of an end result.

Elmore: I think the only way you differentiate is having good quality people continuing to execute to your overall beliefs. Over time that does build trust. And it is a way you can differentiate from somebody who may have a revolving door.

Banking Strategies: So you don't necessarily win business with trust, but you keep business?

Olan: Actually, I think you get both. If you have a reputation of being a quality company, you actually win business. Our industry is heavily driven by word of mouth, which helps you bring in the business. But trust is also the key component in being able to keep business.

Trust is one of those things that, once you break it, it's hard to get back. So, we as an industry, or as a bank, have to make sure that at every single touch point we make sure we're keeping our promise in growing that trust.

It's up to us to make sure that we don't drop the ball, because once we drop the ball on any of those channels is the moment we start to erode some of that trust. You may get away with it one time. But if it starts to happen more than once, the customer relationship can become volatile.

Kirby: Trust definitely plays into customer acquisition and retention. As was said earlier, it's really the trust that comes from one-on-one relationships that leads to customers recommending SunTrust to their friends or coworkers. From a retention point of view, trust is a critical part of clients feeling like we're doing what is right for them so they trust us with their financials and expect us to help them meet their financial goals.

Banking Strategies: At your organization where does the buck stop on trust? Who is responsible for whether the next customer trusts the bank?

Olan: It begins with the CEO and the board of directors, and then goes through each layer of management to the front line. It all stems from the top, in my opinion.

Elmore: I would totally echo that. I think it is the responsibility of everyone in the organization to live up to that standard. But the standard is truly set by the CEO and the board, who must not only talk it, but walk it.

Kirby: I would agree, but with a slight twist. It's true that trust starts at the top and is built around a company branding approach reinforced throughout the management ranks. But I see the critical link as the individual account manager dealing with the front-line customer. That's where the buck stops, so to speak.

Banking Strategies: Having discussed this at length now, what's your view on the general state of consumer trust in the banking industry today?

Elmore: Overall, as an industry, we're doing a good job of communicating to our customers and to the public. That's not to say that it's perfect, but I think it has improved substantially.

It also strikes me that whenever adversity occurs, the banking industry and our individual institutions seem to always rise to the occasion, whether we're talking about 9/11 or a storm somewhere. Those kinds of things just continue to reinforce the concept that banks are trustworthy. All we have to do is just to continue to refine that and execute to it.

Bagby: We have our issues, sure, as do other industries such as brokerage, which is dealing with the late trading problem. You're never going to have a perfect world. I think everyone in the banking industry works hard to communicate clearly what our policies and responsibilities are and to train our people to explain them well and completely.

Ms. Allen is managing editor of Banking Strategies.

Copyright © 2004 by Banking Strategies, published by BAI.

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