When it comes to building trust, there’s something to be said for a good old fashioned one-on-one, especially when it comes to money matters.
A new Harris Poll finds that half of American adults say their trust in banks has declined over the past few years. However, only 18% of Americans say the same about credit unions. Forty nine percent of those surveyed say their trust in credit unions has remained consistent over the past few years.
The biggest loser is online-only banks. Only 39% of those polled say they have at least some trust and 47% having no or very little trust in them.
Megabanks rank second to last, having the trust of only 50% of those polled. Bragging rights go to local credit unions and local/community banks. More than 75% of Americans say they have some or a great deal of trust in them, 77% and 76%, respectively. Meanwhile, 70% of participants say they have at least some trust in regional banks.
Who’s loved and who’s not in part, is generational. Millennials and Gen X’ers, not surprisingly, are cool with online-only banks, compared to older folks.
When it comes to trust, what’s critical? Personal experience. Sixty six percent of those surveyed say this is what impacts their level of trust. Right behind though are such things as quality of products and services, customer service, and fees.
What does all this portend for the banking industry? Experts weigh in.
"People are skeptical of the banking industry post crash, but on a local level, they love their bank and bankers that help them personally and they see them in their communities," says John Oxford, director of communications and external affairs for Renasant Bank. "While branching is changing and it’s often been said it would join the record/CD, video and potentially bookstores as going all online, it is here to stay and local banks need to exploit this advantage by using their ability to connect with clients on a service/relationship level."
Nicky Rudd, a financial planner and investment advisor for Fifth Third Securities touts the hometown advantage, "To be good at helping people make good decisions, you have to be half psychologist, half planner/investment manager. Local, community based advisors have the advantage."
Credit unions came out smelling like roses. "It’s not surprising that credit unions have the highest level of trust among consumers – a position credit unions want and expect to keep," says Vicki Christner, media relations manager for the Credit Union National Association. Indeed, credit unions continue to flourish. This past summer, they surpassed 100 million memberships nationwide, roughly equal to one-third of the U.S. population.
However, local banks and credit unions shouldn’t get too comfortable. "They should get more involved with social media. In addition, credit unions in particular should adopt some of the strategies big banks use to attract customers, such as mobile banking options, as well as online bill-pay," says David Bakke, a financial columnist with MoneyCrashers.com.
For big banks, the message is clear, "They still have a long way to go in rebuilding trust amongst its customers," says Bakke.
Banks are not blind to the realities of needing to make nice. Michael Matza, senior director of Maritz Research says banks are investing in "customer experience" training to help representatives who seem aggressive, impatient or more interested in making a sale, than serving the best interests of the customer.
Big banks would do well to show a little TLC to the younger generation. "Big banks don’t care about smaller accounts," says Jay Sidhu, chairman and CEO of Customers Bank. While they may have mobile apps and online banking, that appeal to young folk, prices are an issue for those just starting out. "Banks charged $32 billion in overdraft fees, that’s many times what America spends on breast cancer, or fresh vegetables," says Sidhu.
Online banks have a huge trust hurdle to overcome. "For sure, it’s a tough nut to crack," says Bakke.
Afterall, online bank personnel miss all that chat time in the branch, and they aren’t active in the community like traditional banks’ staff, particularly community banks. "Community bankers typically live and work in their markets. Accordingly, they can provide that personal experience because they share it," says Michael Lesler, CEO of Bank of New Jersey, a community bank.
Community banks and local credit unions know how to build trust. "They are the ones who show up at the high school football games and give to the local charities. They also provide great customer service and good prices," says Sidhu.
Online banks, though, are not without weapons. "Their trust factor is built by providing a better online/mobile experience, and perhaps a stronger customer benefit of having lower costs without branch overhead," says Oxford.
Bakke suggests that online banks consider live video chat for customers. "That could get some potential clients over the hump of not being able to conduct face-to-face transactions. Another would be to explicitly market the fact that they’re FDIC-insured, something that some folks may not be aware of. Beyond that, online banks can build trust through providing consistent and stellar customer service. That will likely generate word of mouth marketing, something you simply can’t put a price on."