What Will it Take for Financial Services Firms to Regain Customer Trust in 2022?
If there’s one industry where consumer trust leads to success, it’s in the financial services industry. But when researchers look at the data on customer trust with financial institutions, the picture gets muddy. It seems that customer trust is high, but eroding. A mix of demographic changes and industry disruption is, in effect, “shifting the customer trust landscape.”
Financial institutions are in a much different place when it comes to trust than they were after the 2008 financial crisis and ensuing recession. Regaining customer trust now, in 2022, is not an exercise in restoring faith in institutions. It requires convincing a new generation of consumers that individual brands are being “above board,” especially when it comes to things like data privacy and governance. Firms that can do that will realize a major competitive advantage.
How the Customer Trust Landscape is Shifting
First, there’s good news: U.S. households are more likely to trust financial institutions than other insitutitions, including government agencies and fintechs, and especially when it comes to safeguarding their personal data. That was the finding of a survey of 1,300 heads of households done by Bank for International Settlements, and the data held consistent across age, ethnicity, and gender.
That said, overall trust in financial institutions is declining somewhat. A Morning Consult poll of over 4,400 U.S. adults found that, while 13% said they trust the financial industry more than they did a year ago, a full 17% reported that they trusted the industry less. While that swing in opinion is not as large as for other industries (social media companies and entertainment companies, for example), it still shows an emerging “trust gap” to which financial services firms need to pay attention.
That gap is set to grow rapidly. Younger generations especially are reporting that they trust Fintech companies more than any other financial companies, even large National Banks. That trust might come, in part, from familiarity…but that cannot be the whole picture. For one thing, the higher level of trust in Fintechs holds even for those in their 40s—a cohort that did not grow up with smartphones and mobile apps. Other factors, such as a feeling of objectivity and well-defined processes, might also come into play.
Another major factor is consumer opinion about data privacy itself. Trust in a company starts with everyday interactions with customers, and data privacy is a key area where those customers will feel the impact directly.
A Focus on Trust Can Be a Major Competitive Advantage for Financial Services Firms
Indeed, consumers are not shy when it comes to what they want. Most of them simply want to have a clear idea of how their data is collected, tracked, used, and shared. And they want the option to “opt out” of certain activities (sharing contact information with a third party, for example).
In short, having strong data privacy management, with a clear communications component, will go a long way to establishing consumer trust across platforms and user experiences. Closing the trust gap here will be a huge competitive advantage for firms—but it will require a collaborative effort between customer service, risk, IT, and compliance.
But is that collaboration worth the cost? Even putting aside issues of company culture—making decisions around products and service lines rather than around customer concerns like privacy, for example—there is the issue of having the appropriate technology. Lacking the appropriate technology for streamlining reporting and tracking can be a serious hurdle, while investing in the appropriate RegTech makes a strong data privacy management program that much easier.
RegTech is the “Behind the Scenes” Basis for Building Trust
To put the point a little more bluntly: Nothing will betray customer trust more quickly than that moment when someone from the firm has to look the customer in the eye and say, “Your data may have been exposed.”
Or, when the firm cannot give a straight answer to the questions “So when is my data shared? And how is it used?”
The problem here is usually one of scale: The average financial services firm processes thousands of documents every month. Much of that includes various forms and requests that carry with them pieces of personal data and financial data. That data is often a mix of structured and unstructured.
Ingesting and managing all of that data—and doing so in a compliant format—is a huge task. Tracking that data once in the system, and maintaining appropriate access control, can be even harder. This must include audit capabilities that can show who worked with what data, and when (with timestamp). And finally, there has to be a guarantee of full data destruction, so that any attempt to recover or restore data fails when that data truly should be absent from the system.
This is why RegTech must be the basis for data privacy management as well as compliance. As much as some authors want to argue that customer trust is a “human issue,” or a “cultural” issue, trust comes down to this: Are firms making it easy for their employees to “do the right thing” when it comes to handling, archiving, retrieving, tracking, and sharing data?
Think about it: No one trusts Amazon to deliver to their door because Jeff Bezos seemed like a nice guy. They trust Amazon because the company has obviously made the investment in technology, logistics and infrastructure. How much more important will those investments be in the competitive financial services industry?
If the numbers we’re seeing are any indication, they will be very important. Financial institutions cannot gain trust just by talking about the privacy game. 2022 will be the year where they put their money where their mouth is.