This autumn marks eight years since the start of the global financial crisis which led to unforeseen reputational damage to the banking sector and wider financial services.
Governments moved to address the problems and harsh lessons learned. Robust prevention measures, bullish markets and recovering economies since might help us forget about the crisis.
But, the industry, eight years on, still faces an enduring and significant deficit in consumer trust.
Edelman has led the charge of measuring trust for 15 years. Tracking trust in financial services since 2011, our Trust Barometer™ has shown only modest increases in global trust in the industry – and it remains one of the least trusted industries year-after-year.
In the 2015 Trust Barometer™, only 36% of UK consumers state that they have trust in financial services.
Low trust is a core reputational issue. For the UK financial services sector, it’s crippling to the bedrock on which it is built.
The discussion of trust in the financial services sector is not new, but has come under brighter lights most recently at the Bank of England’s Open Forum on 11 November, 2015. George Osborne shared public frustrations with an industry some think went relatively unpunished during and since the crisis; Bank of England Governor Mark Carney revealed that the public still expects significant changes to be made if trust in the sector is ever to be redeemed.
Added to that, in a report released last week, our client – the Financial Services Compensation Scheme (FSCS) – highlights the need for the industry to do more to address the “trust gap” which exists.
The FSCS has an important role in restoring trust in the financial services sector at large. It protects consumers when authorised financial services firms fail. Its mission is to provide a responsive, comprehensive and efficient compensation service that raises public confidence in the industry.
In Mind the Gap: restoring trust in UK financial services, the FSCS (along with Edelman’s 2015 Trust Barometer™ results) examined current consumer interactions and perceptions of the industry. Synthesising the research into a simple framework to describe the three conditions necessary for trust: Alignment, Benevolence and Competence, the report unravels the consumer trust gaps that continue to plague their relationships with financial services in the UK.
The FSCS co-authored the report with Nick Chater, Professor of Behavioural Science at the Warwick Business School and member of the Advisory Board to the Cabinet Office’s Behavioural Insight Team (popularly known as the ‘Nudge Unit’), which applied principles of behavioural economics to the independent research which surveyed over 2,500 UK consumers.
The partnership between the FSCS and the Warwick Business School was first inspired by another Edelman trust insight: the heightened level of trust the public places in academics. As the FSCS’ purpose is rooted in generating consumer confidence and reassurance, aligning with an academic body with such revered research credentials was essential to ensure a thorough understanding of consumer perceptions of UK financial services today. Only then could the FSCS develop solutions to address and help restore identified gaps in trust – in collaboration with the industry.
In this changing world, there is one perennial: trust is an invaluable commodity. What the FSCS’s report shows is that trust in financial services can only be restored and maintained through understanding the complex psychology of customer behaviours and perceptions. Customers also need the assurance from industry that its energies and decisions are serving the best interest of the customers. There is still work to be done.