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Trust in banks is NOT the same as trusting banks

I recently blogged about the Edelman Trust Barometer, which makes clear that technology firms are trusted the most and financial firms the least. This is misguided however, as we need to think about who trusts them with what.

Consumers trust technology firms not to abuse their data? Hmmm. Consumers trust technology firms to be truthful? Hmmm. Bearing in mind that Facebook has had problems with fake news whilst Google has been asked to come clean in its advertising, can they really be trusted.

And why would consumers trust tech firms with their money? If Facebook lost a photo or Google messed up a search result, how bothered are you? If they lost your pay cheque this month or the $10,000 your supplier just sent, how bothered would you be then?

For all the reasons why consumers dislike banks, they should be able to trust them with their money, because the banks are regulated and licensed to do just that: store your money with trust. This is why the RBS and HBOS bad behaviour is truly unacceptable, and bankers should be sent to jail if they abuse this trust.

In other words, banks should be trusted with money, but are usually disliked because of the way they fulfil this role. This has been true ever since I started in financial services technologies way back when, and this love/hate thing with banks is common the world over. For example, I remember St. George Bank of Australia saying that bank brands were less popular than Oz-Pet, Australia’s leading brand for cat poop.

Similarly, when our big UK retailers launched banks in the 1990s, I remember Sainsbury announcing that they had completed a consumer survey to find out which words people most associated with the big banks. The answers were arrogant, condescending, greedy and complacent. Wow! And yet the positions of banks don’t change. The same big bank names lead every country today and have done for the past decades.

Can anyone name a big bank breakthrough during their lifetime? By that, I mean a bank that is truly challenging the largest incumbents?

Santander in the UK? Sure, but they were a big bank entering from overseas and growing through acquisition. Metro Bank in the UK? Well, maybe, but they had billions of backing from Vernon Hill and his mates in the USA, similar to Santander. You may have one in your country that grew from scratch, but I struggle to think of one.

In fact, my question should really be: can anyone name a big bank breakthrough during their lifetime that came from a non-bank?

Maybe Ant Financial with MyBank and Tencent with WeBank … but they’re not replacing Chinese big banks but serving Chinese citizens overlooked by Chinese big banks. Maybe they will scale up, and maybe they won’t. We shall see.

Why is this? Well, as mentioned last week, few people switch as all they want is safe, stable, resilient and robust money stores. However, that may change as the more important question is why don’t consumers trust banks, according to Edelman? I’ll put it this way: I think Edelman is not measuring trust, but likability. The way in which people answer is they like tech firms the most and like banks the least.

When you put it that way, it makes sense. It is why there aren’t many companies in financial services who reach the top brand lists, whilst the tech titans sit firmly at the top. Here is the Forbes Top 10 brands in 2017:

Rank Company Name Brand Value ($ billions)
1 Apple $170.0
2 Google 101.8
3 Microsoft 87.0
4 Facebook 73.5
5 Coca-Cola 56.4
6 Amazon 54.1
7 Disney 43.9
8 Toyota 41.1
9 McDonald’s 40.3
10 Samsung 38.2

Why aren’t banks up there and why is that banks aren’t liked? I think it is for two reasons:

(a) they deal with the second most important thing in my life, money (family first); and

(b) they deal with it badly.

I say they deal with it badly as the business model of banking is built to punish the customer. The model was placed on steroids in the 1990s to maximise shareholder returns through maximum share of customer wallet, which would then be robbed and stolen through fees and charges. I still cannot get over the fact that American banks, for example, process all debits from customer accounts at end of day before applying any credits. As a result, you might go $1 overdrawn before the $10,000 cash you deposited this morning is recognised. That’s why you got charged the maximum fees for being overdrawn for a nano-second, even though the cash was paid in at 09:30 this morning and the debits followed later.

UK banks can be seen to do the same with PPI mis-selling and other nefarious activities.

This is where I believe the technology giants have a real opportunity. It is not to be a bank, but it is to be better with the customer. It is to focus upon information enrichment and to inform and educate. It is to highlight bad practices and encourage good ones.

I was saying this the other day when talking about the big internet giants and saying that their core business is creating commerce (Amazon and Alibaba), relationships (Facebook and Tencent) and knowledge (Google and Baidu). Being a bank is non-core to these firms, but enabling more commerce, relationships and knowledge is core. That is why Amazon and Alibaba offer payments and loans to merchants and consumers, as it encourages more buying and selling. It is why payments through social messages makes sense, as it makes relationships easier.

Combine making commerce, relationships and knowledge easier, simpler and frictionless is the focus of the internet giants, and informing, educating and encouraging a simpler, smarter financial life will be in their mandate. They can do this through Open Banking and Open APIs, and they can focus upon getting rid of banks’ bad practices. In other words, technology titans can focus upon rewarding customer behaviours, rather than punishing them. In so doing, they will not only be liked and trusted as brands, but also liked and trusted with money. That’s where the banks should worry.


About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.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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