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Trust, brand and money are different things

For some years there has been a lot of discussion about which brands consumers trust for banking.  Rather than banks, protagonists assert that it’s Apple who could win, as they have the #1 brand with millennials.  Alternatively it could just as easily be a Wal*Mart, Virgin, Google or someone else.

For some years, I’ve joined in with these discussions, but I’m not going to anymore.

This is because brand and trust in banking is confused and is often used the wrong way.

We talk about trust in brands, based upon consumer views of the world.  The world’s most trusted brands are the likes of Apple and Virgin, sure, but these are not banks.

Equally, banks talk about the one thing they have at their heart is trust, but banks do not mean trust in the sense of brand.

This is where it gets confusing, in terms of how we define trust.

Trust in banks is not the same as trust in brands.

Trust in brands is related to how much affinity we have as consumers with those brands.

The world’s best-loved brands are purely that because they have gained some form of iconic consumer desire status.

Nike, Porsche, Louis Vuitton, Coca-Cola, McDonalds are all great brands … but can they be trusted as stores of value?

Not in the same way as banks, and not with a trust in their monetary store in the same way as the trust in their brand.

Banks are not trusted as brands – in the latest lists of top brands with millennials you won’t even see a bank in the list – but they are trusted stores of value.

It is this latter point that banks focus upon.

Their sense of trust is not with their brand, but with their state-backed guarantee that they won’t lose your money.

Banks are guaranteed to keep your money safe.

No trusted brand has that guarantee.

Therefore, you can have your iTunes or iCloud account compromised, and Apple’s only sense of shame is a reputational hit on your trust in their brand. They have no duty to compensate you for your loss of reputation or value (take note Jennifer Lawrence).

And this is where the fundamental chasm lies in the arguments about consumers running away and trusting non-banks with their money.  It may be true that they love these non-bank brands but, as consumers grow up, they become more and more aware of the sensitivity to monetary flows and start to care about their value stores trust worthiness, in terms of their guarantees as safe deposit stores.

For example, in a conversation about youngsters the other day, a colleague said that they were encouraged to bring their teenage children to a bank conference recently.

When they got there, the teenagers were invited on stage to discuss banks and bank brands and, unsurprisingly, none of the kids knew anything about a bank.

“Do you not remember that one of the banks has a brand with a black horse?” they were quizzed.

“No idea”, they replied.

That is because, for most youngsters, banks are irrelevant.

Banks become relevant when you get a job, as most employers want to pay direct into your bank account, but that still does not make them out.

No.  A bank only really comes into its own trusted space when you need to save or invest or when you lose money.

When a payment goes wrong.  When you need to reverse a transaction.  When you need to challenge a charge.  When you need a loan.  When you need to find a way to leverage credit.

That’s where banks are trusted, as state-guaranteed and licenced institutions.

So it’s not the bank brands we trust, but their guaranteed status as stores of value.

Show me a trusted brand that has that guarantee on their store of value, and that’s when you may find a non-bank brand truly threatening banking.

But then the non-bank brand will need a bank licence to do that and, at that point, they are a bank anyway, so it is all the same.

In summary, trust in a brand is not the same as trust in a bank.  For this reason, when we talk about trust, we need to be clear that it is different in the context to which it applies.

 

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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  • Nick Senechal

    I couldn’t agree more with this distinction. I think the safe custodianship that banks provides is essentially (necessarily?) dull but absoutely required. We all need a safety net. Its no coincidence that kids refer to the BANK of Mum and Dad and not the “icloud” of Mum and Dad: things don’t need to be cool to be relied on every day.

  • Spot on. A few years ago I collaborated with a French consulting firm that has done work in understanding the nature of trust in B2B and B2C context to apply their work to financial services. Distinguishing between “trust in brands” and “trust in banks” is a great distinction. Trust is a complex construct. The research my firm and the French consulting firm did found that there a number of dimensions that influence a consumer’s trust in his or her bank, and that the relative contribution of any one dimension differs across consumers.
    Yet, too many bank marketers, and the host of research firms that want to gain publicity from conducting trust studies, want to boil trust down to one question: “how much do you trust your bank?” or “who would you trust to do your banking”?
    Practically speaking, the answers to those questions are useless. I’m joining you in ignoring these studies from here on out. Well, we’ll see how long that lasts. 🙂

  • Roy Vella

    While I completely agree with the distinction above, I think it’s important to recognise that becoming a “state-guaranteed and licenced institution” is not much of a barrier to entry for the “trusted brands” any longer, particularly in retail. Gaining (or leveraging) a banking licence is becoming common place and so the question is less about trust and brands and more about whether the incumbent banks can survive a world where their regulatory status provides little protection against a superior experience. And where switching will, eventually, becoming instantaneous (as we already have with telecomms and utilities – such that the account number and sort code belong to the customer, not the bank, and moves with them.) That’s the threat to “banking” as we once knew it… IMHO.

  • Chris Skinner

    I hear you Roy, but don’t agree. The bank licence piece is such a pain in the ass that most non-banks really cannot be bothered with the audit, compliance and regulatory regime it entails, let alone the capital reserves that go behind all that. Better to steal basis points margin on products than compete on core stomping ground of deposits that is becoming a marginal market worthy of competition anyway.