Regaining customers’ trust will prove a major task for banks

An already wobbly relationship between banks and their customers has been made more unstable by the royal commission.

You’re stood in the checkout line at the supermarket with two kids and a giant trolley of shopping. Suddenly you realise your purse is gone and that the thud you heard a moment ago in aisle six was the sound of it falling out of your coat and onto the floor. You can’t leave your trolley and the kids, but you need your purse to pay for everything and get out of the supermarket.

You look at the man stood patiently behind you in line. You explain your problem and ask him for help. He sprints off to aisle six. As he disappears, he looks back and says: “Don’t worry, you can trust me.”

Do you? Or does his throwaway comment actually make you doubt him? Can you trust him?

That question is at the top of the agenda for every major bank and financial-services brand in Australia right now. An already wobbly relationship between banks and their customers has been made even more unstable by the royal commission and the daily stream of dodgy executives apologising for various acts of malpractice and misdirection.

Right now, across the boardrooms of Australia, senior banking executives are obsessed with trust more than any other aspect of their business. The degree to which customers trust their bank is being endlessly measured and monitored by banks which see this single attribute as central to their continuing success. The more you trust banks, the more likely you are to open an account with them. To shift more of your money to them. To be satisfied with their service. Perhaps more importantly, given most big banks sit on a “back book” of billions of dollars from mortgage customers, the more you trust a bank, the less likely you are to move your account elsewhere.

But the bad news is that all the data suggests we are among the least trusting customers on the planet when it comes to banking. In Edelman’s 2018 Trust Barometer only 49 per cent of Australians trusted the financial-services sector. This minority result puts Australia in the same group as the Irish, whose experiences of the disastrous “Irish Tiger” soured them on banks for a lifetime, and Russians, who pretty much don’t trust anyone at the best of times.

With trust at the top of the corporate agenda and down the bottom of the global league table, it is no surprise that Visa — which works with almost all the financial-services brands on the planet — has stepped into the fray. Last week the company sponsored a trip by Kent Grayson from Chicago’s Northwestern University to meet with, and speak to, many of our leading financial-services companies. Grayson, who is known as the “Trust Professor” in America, heads up an advanced research institute called The Trust Project. There is no-one better on the planet to talk to Australian banks about trust and he did not hold back.

The first issue Grayson was clear on last week during his talks was that directly trying to increase trust among customers was a pointless task. Trust is founded on three very distinct variables: competence, honesty and benevolence. Seen this way, it is easy to see just why so many Australians lack trust in their financial institutions and why those already low levels are decreasing further.

The royal commission has presented us with several significant examples of financial-services companies not only getting away with incompetence but making significant amounts of money from the sin. It’s one thing for Commonwealth Bank to admit in front of the commission that it charged hundreds of clients for financial advice that they never received because its systems were “hopeless”. The fact CBA then repaid $118 million to the customers who were charged for the invisible advice reveals the extent of the incompetence and the amount of money involved.

Not surprisingly, basic competence is not enough to generate trust. Consumers must also believe you are honest. And once again the royal commission is shining an unfortunate light on many senior executives in the financial-services industry and their abject inability to tell the truth. Take the shocking case of Sam Henderson, chief executive at Henderson Maxwell and regular Fairfax and Sky Business pundit. The royal commission not only heard that Henderson was dispensing advice that would have cost his clients a small fortune in lost savings, he also admitted his CV contained qualifications he had not completed and that he was likely to have instructed his staff to impersonate clients to access their private financial data.

Finally, there is the thorny issue of benevolence. Grayson’s research shows a clear link between trust and believing that your bank has your best interests at heart. It’s no coincidence that two of the few brands to genuinely engender trust among their customers — AustralianSuper and Bendigo Bank — are both founded on the principle of overtly and explicitly putting customers first. In contrast, the royal commission has repeatedly shown us a rogue’s gallery of financial advisers who clearly hold their organisation and their own financial interests above those of their customers. This lack of benevolence and the belief that banks appear to serve themselves and not the customers who patronise them lies at the heart of the trust issue.

When the royal commission does finally come to a close, it is certain that, aside from much-needed improvements to the systems and structure of the Australian financial-services industry, it will have had a seismic impact on the already parlous state of trust that we have for the banking industry. The challenge for financial-services brands is that simply putting the word “trust” into their brand values or adding “trusted partner” to their mission statement will achieve nothing. Like the man running off into the distance at the supermarket who tells you to trust him, proclaiming your trustworthiness often engenders the opposite emotion.

Grayson was clear last week that the perceptual hangover from the royal commission will not be fixed with a slew of slick ads with warm, smiling faces and slogans featuring the “T word” at every turn. To truly fix the trust issue with financial services, we need brands that are more competent, more honest and more benevolent. Is it too much to ask?