With a prime opportunity to prove their dedication to customers and constituents, banks and the federal government took various actions to help Americans through the COVID-19 pandemic, but was one working harder than the other? Perhaps, as 73% of consumers say they trust their financial institutions, versus just 51% who feel the same about the government regarding banking and personal finance.
In times of crises, it’s natural for humans to look for other people or institutions for support and, in turn, decide whom or what they can trust. The coronavirus crisis has proved no different with the subsequent economic fallout — and ongoing recovery — making many consumers question who is on their side. DepositAccounts surveyed more than 900 consumers with bank accounts to see where they’re putting their trust.
- Consumers have more faith in their financial institutions than in the federal government. 73% of consumers trust their financial institution to keep their best interest in mind, while only 51% say the same about the federal government regarding banking and personal finance.
- The pandemic impacted consumers’ loyalty to their financial institution, primarily in a positive way. Overall, 71% say their financial institution did right by consumers during the pandemic, and 30% feel more loyal to their financial institution as a result.
- Baby boomers trust their financial institution more than any other generation, while Gen Zers trust banks the least. Baby boomers have the highest level of trust in their institution regarding personal data protection, asset protection and keeping their best interest in mind, while Gen Zers are the least trusting.
- While most consumers trust their financial institution, annual percentage yield (APY) reductions often break that trust. 43% say APY rate reductions cause them to trust their financial institution less, and more than a third of those who switched banks during the pandemic name APYs as a reason.
- Those who bank with traditional brick-and-mortar institutions or credit unions generally have more faith in their financial institution than those who primarily use an online-only bank. For example, 75% with a brick-and-mortar bank and 74% with a credit union trust their financial institution to keep their best interest in mind, versus 61% with an online-only bank.
In bank we trust
Consumers struggling through the crisis may have relied on support from either or both their financial institutions and the federal government. While the government’s assistance included unemployment benefits and stimulus checks, some banks have worked hard to maintain loyalty and support customers throughout the pandemic with waived fees or other services.
Banks’ efforts may be paying off, as 73% of consumers say they trust their financial institutions to have their best interests in mind. With just 51% of respondents saying they trust the government with their financial interests, perhaps elected officials could take a lesson from the banks.
“The government is often associated with an uncaring bureaucracy,” DepositAccounts founder Ken Tumin says. “A bank that provides good customer service and competitive products can have an advantage in generating more trust.”
For consumers, however, these sentiments follow a pattern they may have predicted before the crisis.
When DepositAccounts surveyed consumers in April and May 2020, just 27% said they trust the government to do right by consumers through the pandemic, versus 40% who put their faith in banks. By June 2021, 71% of respondents say their financial institution has done right by consumers during the pandemic, just a bit more than the 62% who say the government responded similarly.
Pandemic inspires consumer loyalty to their financial institutions
While 58% of consumers say their loyalty to their financial institution didn’t change during the pandemic, consumers who report changes are more likely to feel increased loyalty. In fact, 30% of consumers say the pandemic made them more loyal to their primary financial institution, versus 12% who say it made them less loyal.
Banks and credit unions working hard to build trust and customer loyalty might be doing a better job with younger consumers.
Half of Gen Z respondents (ages 18 to 24) say their loyalty increased due to the pandemic, while 84% of baby boomers (ages 56 to 75) say their allegiance went unchanged.
“Baby boomers may have experience building relationships with bank officials at local brick-and-mortar banks and credit unions,” Tumin says. “Even for those Gen Zers who have opened accounts at brick-and-mortar banks, they probably don’t visit them much to build relationships.”
Perhaps these financial institutions excel in attracting and retaining customers for life. Older respondents were increasingly less likely to have changed banks during the pandemic. Only 22% of respondents overall say they switched their institution during the pandemic, but Gen Z consumers were far more likely than baby boomers to do so:
- Gen Zers: 43%
- Millennials (ages 25 to 40): 35%
- Gen Xers (ages 41 to 55): 19%
- Baby boomers: 2%
It’s not just surface loyalty, either. Baby boomers place the most trust in their financial institutions compared to other generations. When thinking about personal data protection and asset protection, roughly 86% of baby boomers trust their chosen financial institutions, compared with just 63% of Gen Zers.
Brick-and-mortar, APY — what makes customers more trusting?
Pens, lollipops, or lounges at branches might improve the overall banking experience for customers, but consumers seem to be more concerned about their money and how it will grow in a financial institution rather than some of the other perks. When a bank or credit union drops its checking or savings account rates, consumers may lose some of their trust in the institution.
After a year plagued by dropping interest rates, many consumers may expect some fluctuation, but 43% still say APY rate reductions harm the trust they’ve placed in their financial institution. In fact, more than 1 in 3 consumers who switched banks during the pandemic say they did so to get a better APY. (Some of them hopefully found an enticing sign-up bonus offer from their new institution.)
Beyond account terms, it appears human connection may be helping banks earn customer trust. Consumers who report using a traditional brick-and-mortar bank or credit union are more likely to trust their institution than those who primarily bank online.
Though most (61%) online bank users trust their institutions, an average of 74% of physical bank or credit union customers have confidence in their branches.
“Being able to talk with a bank official in person when problems arise can feel more comforting than having only phone or online options for customer service,” Tumin says.
Personal preference may lead consumers to one option or another, but online banks can be just as trustworthy as traditional brick-and-mortar networks.
Tumin suggests looking for a digital bank explicitly rather than a tech company that partners with a bank.
“Going through a fintech ‘middleman’ adds some risk and will generally not provide the best customer service,” he says.
Additionally, Tumin says consumers should research the bank’s customer service reputation and availability, as well as account disclosures or other frequently asked questions, to help them decide.
DepositAccounts commissioned Qualtrics to field an online survey of 923 consumers with a bank account. It was conducted June 14-16, 2021. The survey was administered using a non-probability-based sample, and quotas were used to ensure the sample base represented the overall population. All responses were reviewed by researchers for quality control.
We defined generations as the following ages in 2021:
- Generation Z: 18 to 24
- Millennial: 25 to 40
- Generation X: 41 to 55
- Baby boomer: 56 to 75
While the survey also included consumers from the silent generation (defined as those 76 and older), the sample size was too small to include findings related to that group in the generational breakdowns.