Relationships Built on Trust

First, the facts. In the June 2012 BAI Demand Pulse, we asked financial institutions which phrase best described their business culture: 1) customer service professionals, 2) focused product and service retailers, 3) generalized provider, 4) traditional and reliable bankers and 5) relationship focused. The number one response was “relationship focused; 41% picked that answer followed by “customer service professionals” at 23%. When asked which business culture they would like to display in the future, “relationship focused” was cited by 55% (and nearly 60% of larger institutions).

When we asked bankers what is hindering their relationship management efforts today, most identified not having a Customer Relationship Management (CRM) solution for a transparent 360-degree view of the customer. This was also the highest investment area for sales and service effectiveness so banks do appear to be committed to developing a solution. The most-cited barrier to CRM implementation was inflexible information technology systems. Related to this issue is the lack of analytic capabilities to provide solutions to customers.

Now, for some opinions sprinkled in among the facts. Although technology and CRM is undeniably important, the key to building any great relationship begins with trusting the bank, which has not been an area of strength for financial services in recent times. BAI has tracked customer trust in banking since 2009. Every cycle, more customers say banks are less trustworthy than they were six months previously. Large banks are viewed as the least trustworthy followed by regional banks, community banks and credit unions. However, despite all the changes or disruptions occurring in the industry overall, customers’ view of their primary financial institution as trustworthy remains stable. One thinks of the old adage, “I hate Congress but love my Congressman.” Still, as long as banks are cited in the headlines for money laundering, rate fixing and trading losses, the public view of the industry as a whole is not likely to improve.

In their book Extreme Trust: Honesty as a Competitive Advantage, Don Peppers and Martha Rogers write about the rising levels of transparency driven by social media that will require businesses to proactively protect the interests of their customers. They believe extreme trust will be a transforming force in every industry, citing Apple, for example, which stops customers from downloading and paying for songs they already own. Peppers and Rogers also envision mobile telecom companies putting customers in the correct calling plans for their usage patterns, rather than just the highest priced plan, and gift card providers warning owners before the cards expire. They argue that many businesses operating today make short-term profits by taking advantage of customer mistakes or lack of knowledge. And they specifically mention that retail banks won’t be able to rely as much on overdraft charges and that successful credit card companies will be expected to help customers manage spending habits.

So, let’s examine a radical new idea in the credit card space, the Barclaycard Ring Card. This is the first social credit card designed and built by “crowdsourcing.” The card has low rates, fees and simple terms and gives cardholders a piece of the ownership (aka “giveback”). In a recent interview with BAI Banking Strategies, Barclaycard executive Paul Wilmore says, “We are trying to be as transparent as we possibly can to show the community how much Barclaycard makes and how much we intend to share back with the community. It also enables us to show the community how good behavior results in good financial results. It’s one more step in order for us to build that trust with the community.”

In our Demand Pulse survey, we asked financial institutions about their plans for pursuing customer-driven social banking products (like the Barclaycard Ring Card). Eighty-six percent of bankers said “no, and do not plan to offer any products like these in the near future.” As more banks aspire to become relationship-focused in the future, hopefully consumer trust, transparency and the voice of the customer will be restored along with long-term profitability of the financial services industry.

Mr. Riddle is a director, research and market intelligence, at BAI. He can be reached at [email protected].