Why just having a customer performance metric is not enough. Every…
It’s fair to say that the dust has far from settled on the ramifications of the Hayne Royal Commission. With potential civil and criminal charges to come and sweeping changes recommended to mortgage broking, superannuation and the regulatory bodies, amongst others, there’s plenty of fight left in this dog.
However, the consensus seems to be that many of the sectors that picked up the biggest headlines got away relatively scot-free in terms of outcomes. For example, there was no demand for the banks and their wealth management arms to be forcibly separated, even though this is a move that most of the the Big 4 pre-empted by looking to divest their wealth business units (even if NAB may be walking this back).
There is a general perception that thanks to the Commission, trust in the Big 4 (plus AMP) is shattered, which, if true should have significant ramifications to at least the short-term prospects of these major players.
However, the release of the commission’s report saw a $19bn rise in the Big 4’s value as investors jumped on the outcomes and as we all know, the markets generally don’t lie.
So we asked ourselves, ‘trust and banking makes a great headline, but does it reflect the reality?’
Is trust shattered or not?
The story in the media is that trust in the major institutions is at rock-bottom, while the team at Yell has a more nuanced view.
Yell’s own research into trust and financial services, has shown a general downwards trend of consumer trust in the industry and specifically the banking category. Admittedly, it’s coming off a relatively low base, however, we’ve yet to see trust plummet off a cliff as the headlines suggests.
In the meantime, according to recent Roy Morgan research, customer satisfaction, while on a slight downward trend, still remains high.
This got us thinking. When we ask consumers if they trust their bank, what does that actually mean? Trust them to do what?
What does trust mean in an experience-based society?
We’ve long contended that trust in financial services is inextricably linked to the core experience delivered day-to-day. For most people, their experience is exceptional. Digital interactions have changed our lives for the better, giving us better visibility and control of our money. Therefore, the perception is that for most people, banks can be trusted to deliver the day-to-day experience.
As we approached the tail-end of the Commission, we knew that this theory was being tested, and it was time to do a deeper dive into the motivations behind consumer trust in financial services. We broadened out the questions to include both rational and emotive responses, essentially splitting out asking about what financial firms do, from how they do it.
Partnering with research firm Ipsos, we asked consumers about their perceptions of a number of industry sectors including banking, super, insurance and wealth management. The results uncovered insights that further reinforced our belief that in an experience-centric society, delivering an exceptional interaction experience can cover up a multitude of sins.
However, when it comes to perceptions of putting the customer first, in many cases, especially the Big 4 banks, trust falls through the floor.
Rational vs emotional drivers and their influence on trust
The impact of delivering on a functional experience cannot be underestimated. This may be why in part the markets rose, why bank profits still continue to break records and why AMP has seen the main impact of the Commission’s findings.
It’s also why significant investment continues to pour into incremental improvements in the (primarily) digital experience of the Big 4 banks.
It raises the question – If your bank does what is says it’s going to do, gives you access to your money, keeps it safe and has technology that allows you to perform your primary financial tasks – does it matter how it acts? Given the recent financial and market performance, the answer appears to be no, but that may be changing.
AMP on the other hand, doesn’t have that same role in people’s everyday lives. Primarily having a focus on wealth and super, both long-term and relatively low-touch experiences, it’s harder for it to deliver an experience of functional outcomes that make a difference on a day to day basis.
There’s clearly a multitude of other strategic issues that AMP is having to contend with, but without that ability to demonstrate a functional utility like the big banks, it’s possible that it lacks the foundation of functional trust on which to depend and rebuild its connection with its customers.
The impending rise of emotional connectivity and trust
While functional utility delivers on the core foundations of trust, we believe the opportunity lies in delivering on the emotional drivers too. This is where our research shows that the Big 4 are perceived to fall over and may be where new and existing providers can deliver an appealing alternative.
Once again, our research suggested that while approximately a third of Australians are happy with their existing financial services providers, there is a significant number who are open to considering that change, or are actively considering changing providers.
There is likely a difference between the stated intent of those we researched and the action they will take, especially given the arduous nature of changing your whole of banking relationship. However, it does appear that consumers will be more open to greater consideration of other providers when they have a new banking need.
While this may not mean that the consequences of distrust of the Big 4 will be a collapse of their ‘whole of wallet’ customer base, it will likely see an erosion of parts of their offer to new and existing entrants which present a more appealing customer story.
The opportunity is for those organisations not caught in the full glare of the Royal Commission to offer credible alternatives when the time is right. That means delivering on functional outcomes comparably to their existing providers, while seeking to meet the emotive needs that differentiate themselves from the Big 4 (and AMP).
Want to find out more?
The Yell team is spending March offering to present the latest insights on trust and the Royal Commission from our Ipsos research and we’d be happy to share the outcomes with you and your team.
If you’d like to have us present to you and your team, please contact me at firstname.lastname@example.org