PwC research: Financial services industry faces bigger problem than lack of trust - apathy

• Fewer than one in three customers now trust their bank, yet switching levels remain low
• Over half of customers do not believe regulatory reforms are enough to ensure history will not repeat itself
• Banks have opportunity to build reputation based on higher data security consumer trust levels than new entrants

One word sums up customer feelings about banks, insurers, fund managers and other financial services providers: apathy, specifically the type that stems from frustration, according to PwC’s latest report, How financial services lost its mojo – and how to regain it, published today.  The report is based on analysis of a survey of over 2000 people across the UK.  The report also reveals that although almost one in two people (49%) believe regulation of the financial services sector has been strengthened in the wake of the crisis, a greater proportion (57%) do not believe the reforms that have been implemented are sufficient to ensure that history will not repeat itself.

The sense of apathy among customers is highlighted by the survey findings through generally low scores on the vast majority of questions and the combination of low trust scores and inertia.  For example, while only 32% of people trust their retail banks, only 11% have changed their current account provider in the last year.

George Stylianides, Financial Services Risk and Regulation leader at PwC, commented:

“Tackling this apathy must be an over-riding priority for all financial services companies. Having a customer base that is both unresponsive and potentially volatile is the worst possible state of affairs for existing financial services providers.  However, with switching levels relatively low and relatively high trust in banks to hold customer data, there is an opportunity for banks to reconnect with their customers.

“Those who don’t change now, and those who don’t make the right changes, risk going further down the road where the people  they are trying to reach have stopped listening and will only pay attention again when something genuinely different comes along.”

The survey suggests that consumers’ lack of trust is affecting all financial services sectors, not just banking, reflecting a generalised malaise across the industry. As table 1 reveals, fewer than one in three consumers now trust their bank, while for other types of financial services company, ratings are even lower. The fact that certain types of institution have been at the forefront of industry issues in recent years has not prevented other organisations from suffering reputational damage.

Table 1: How trust in financial services firms has been eroded

                                      Number of consumers    Number of consumers whose

                                      who trust organisation     trust has increased in past year

Retail banks                 32%                                    10%

Investment banks       15%                                    6%

Financial advisers       28%                                   6%

Insurance providers    27%                                    6%

Fund managers           12%                                    5%

The police                     53%                                    10%

General practitioners  76%                                   13%

NHS nurses                 79%                                   14%

 

Repairing trust and overcoming apathy

 The survey suggests that consumers’ personal experience with financial services providers is generally the most significant factor in determining the level of trust (the exception being for investment banks, where consumers have little direct contact with the sector).

Table 2: Influences on people’s trust in financial services providers

What are the most influential factors affecting whether distrust financial services providers?

                                      Retail    Investment  Insurance    Fund          Lawyers/   Financial
                                      banks    banks           providers     managers  solicitors    advisers

Personal experience    41%        20%              39%              19%            35%            30%
dealing with provider

Press coverage            30%       32%              25%              25%            22%            23%

Transparency of price 27%       22%              25%              19%            19%            21%
and terms/conditions

Conversation with       20%       16%               23%              14%            26%            21%
friends and family

 

The financial services industry’s traditional response to concern about consumer mistrust has been to stress goals such as greater transparency and improved financial education. However, the survey suggests the impact of further work of this type might be relatively limited, at least in isolation. Though greater transparency is the single improvement most likely to rebuild consumer trust in financial services, even here fewer than one in two people (46% when asked about financial services as a whole) would be impressed by such changes.

George Stylianides, Financial Services Risk and Regulation leader at PwC, commented:

“The lack of trust in the financial services sector partly reflects a failure of providers to articulate the value they are offering, leading to suspicions that their overwhelming priority is to make short term profits.  Providers must find new ways to explain the services they are providing, encourage consumers to voice their goals, priorities and expectations, and to respond to these.

“Taking genuine and conspicuous steps to satisfy customer goals, priorities and expectations, especially where there is no obvious short term gain – or even a clear cost – to the provider, is a response we’re starting to see more of.”

Digital commerce is a growing phenomenon – to which financial services are well suited – and this is likely to be a key battleground going forward both between incumbents and also for challengers. As table 3 reveals, people consistently rate financial services companies ahead of businesses such as retailers on their data practices. The opportunity here is for financial institutions to deploy their existing reputations as relatively trustworthy custodians of customer data in this particular battle.

 

Table 3 Financial services companies are more trusted to securely hold data

Which of the providers that acquires information on you do you trust to hold this data securely?

                                                                                     Trust                    Distrust

Your bank                                                                    52%                      21%

Your savings provider                                               47%                     20%

Your pension provider                                              39%                     18%

Your insurance provider                                           35%                      26%

Your investment provider                                         23%                      22%

Your financial adviser                                                25%                      21%

Online services such as social networking sites    15%                      50%

Online services such as online retailers                  22%                      40%

 

George Stylianides, Financial Services Risk and Regulation leader at PwC, concluded:

“All is not lost. Given the torrid time the financial services sector has suffered in recent years, the residual level of trust in the industry might be regarded in a more positive light. The historic relationships that providers have built with consumers – who still trust them as guardians of their finances, if not as customer-focused service providers – endure, and offer a foundation on which to build for the future.

“Ultimately, this all translates to the quality and resilience of financial institutions’ brands, not in the sense of logos and colour schemes, but in the sense of the expectations that exist in the minds of customers and other stakeholders of consistent, superior service provision. With the traditional barriers to entry becoming eroded – or becoming harder and more costly to sustain – brand is becoming the critical strategic asset of the future, and financial institutions must therefore rediscover their mojo with customers to stand out for the right reasons.”

Ends 

 

Notes to editor:

Download How financial services lost its mojo - and how it can get it back_full report

PwC’s Financial Services Risk and Regulation (FSRR) practice of over 1000 people helps clients across the financial services sector to:

• Stay alert to financial and regulatory risks
• Adapt their business and culture
• Protect their customer and reputation in the event of issues such as technical difficulties, operational failure or cyber attacks
• Repair damage they may suffer from process or product failure

For more information visit www.pwc.co.uk/fsrr

Media contact:

Katherine Howbrook, PwC media relations, Tel: 020 7212 2711/07595 609 737, Email: [email protected]