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Disruption is a dirty word in the financial services world. But they’d better get used to it. They need to start investing in customer experience, trust and transparency as challenger brands are coming up fast.
Five years ago, Barclays CEO, Anthony Jenkins, gave a speech called ‘Approaching the Uber Moment in Financial Services.’ Interbrand’s Best Global Brands 2019 data suggests that moment has arrived, with almost all of the financial institutions on the list stagnating. These weak signals are further emphasized by the ominous presence of the lurking tech sharks. With the exception of Mastercard and Visa the biggest traditional, incumbent brands in some cases are declining. Despite a significant amount of disruption in the sector, we are not seeing the level of investment in brand that one might expect. These weak signals suggest that an inflection point is looming. Incumbent banks risk being relegated to the back of the mobile wallet unless they can win a battle that’s being drawn along completely new lines.
While the financial sector is essential to the fabric of modern life, customers increasingly view banks as a commodity. Customer Agency, C Space’s data shows that along with utility businesses, banks have some of the worst customer relationship scores of any sector. This runs counter to the broader trend in branding which is towards more “human” brands, which emphasize greater transparency and better corporate behavior. This is all the more worrying when you consider that CEO, Satya Nadella, rode the wave of Microsoft’s inflection point by identifying customer engagement as a leading indicator and responding with urgency. He said “Think about having empathy for your customers – what are they trying to solve, and how do we become the partner of choice in helping them solve their problems?” So whilst most businesses are focussed on “humanizing” their brands, the traditional banking institutions can’t seem to get there. JP Morgan and Goldman Sachs are some of the least human brands around, with major scandals in 2018 also helping to ensure their lower ranking in Best Global Brands 2019. Conversely, our customer sentiment data shows that perceptions of USAA, a US bank with an authentic social mission, is improving, which bucks the trend for all other banks in the US. In many respects, for customers in the current landscape trust boils down to not having to choose the brand you trust the least. Many banks, who are keen to offer services to the most solvent, offer less support when more help is required.
Moreover, trust appears to be morphing. It’s moved from trust based on functionality: “Do I trust you to cash my cheque?” “Do I trust you to pay a claim?”, to encompass an additional, emotional trust layer: “Do I trust you to do good by society and to represent my values?”But is it realistic to imagine that monolithic global brands could transform into something customers deeply trust? They do have many advantages. With barriers to entry in banking so high, they have a lead on the infrastructure and the advantage of having built a relationship of “functional” trust with their existing customer base. This gives them an advantage over the tech giants who are muscling into the space. And while we don’t trust our banks, we just might trust big tech brands even less. Adjacencies in other toxic industries are worth observing. British American Tobacco is making a commitment to a smokefree world and BP has made a commitment to go ‘beyond petroleum’. Similarly, the first financial institution to make a genuine commitment to clean up its act could win.
The question could be, then, how quickly can the traditional banks build the emotional trust layer required to capitalize on this advantage? What the neobanks have unquestioningly done is to demonstrate that there’s a scalable market for a better customer experience in banking. And this demonstration comes as the battle of the titans – tech giants, incumbent banks and a shoal of challengers – is just getting started. Open banking, blockchain and 5G will drive an unprecedented shakeup – and a shift of power towards the customer. In this context, it may also become easier than ever to build Trust 2.0 into the traditional banking experience if one of the incumbents is bold enough to move.
As the tech giants gear up to making their own bold moves into finance, extending their reach into our financial lives, traditional banks could be relegated to just becoming suppliers of big-ticket items, such as mortgages and loans. The threat from Ant serves only to compound this problem. The way to solve this? It’ll take an Iconic Move from a bank prepared to use its advantages in scale and trust and commit deeply to a better way – completely reimagining its model to one of responsible value creation for consumers and shareholders.