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 nigel@yellcreative.com
