“I explained I’m a gambler...they can clearly see that I’ve got a gambling problem because of the transactions I’ve been making, and I don’t understand why they keep offering me more money.”
- David Harris, a witness in the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry
This year Australia has been rocked by revelations from the Royal Commission's investigation into misconduct in the financial services industry. During the course of the hearings, major financial institutions have acknowledged varying amounts of negligence or poor service. And Australians – who are already a fairly skeptical bunch – now have more reason than ever to distrust banks. So how can banks use customer experience (CX) to rebuild the trust they have squandered?
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was established late last year with the first public hearings beginning in March 2018.
The idea for the commission stemmed over the past few years from various sources with media exposés, whistleblowers and politicians all putting pressure on banks to come clean about their systemic problems.
Over the course of the hearings, major financial institutions have acknowledged a variety of acts of misconduct such as misinforming customers about home loans, credit cards and financing, charging fees for no service, intentionally misleading the regulator and administration errors resulting in the loss of customer data.
The problems seem to stem from changes in what a bank actually is. In the old days, a bank was simply a safe place to stash money or receive a loan. But, starting around two decades ago, Australian banks decided it was time to get in on the wealth management and financial advice game.
Having financial planners work for banks is an example of "vertical integration", and in this case, according to the Australian regulator, it has created conflicts of interest. This is because the rise of bank-owned financial planners inevitably led to a highly competitive market in which the planners do whatever it takes to make a sale. As a result, many customers have ended up with inappropriate loans which they have no hope of repaying. In the case quoted above, a major bank extended a man's line of credit after he told them he had a gambling problem.
The media coverage of the royal commission has been widespread, leading to huge backlash from customers and shareholders. In May, for example, AMP – another bank implicated by the commission – held a disastrous annual meeting in which shareholders delivered the largest ever vote against a remuneration report.
Trust matters - a lot
How important is trust anyway? According to the Harris Poll Reputation Quotient, the answer is "extremely".
Since 1999, Harris has been quantifying the reputation ratings for the 100 most visible companies in the US as perceived by the general public. Harris surveys over 20,000 Americans across 20 attributes including social responsibility, emotional appeal, and products and services. Harris found that 80 per cent of respondents see "lying or misrepresenting facts about a product or service", as the top issue impacting reputation. Companies currently at the bottom of the list are the Weinstein Company, formerly helmed by Harvey Weinstein of #metoo infamy, Equifax, which recently suffered a massive breach of customer data, and The Trump Organisation, which needs no introduction. Clearly, all of these companies have serious trust issues in one way or another.
5 Ways Banks Can Rebuild Trust Through CX
#1 Go Customer Centric
Customer centric refers to a way of doing business that is focused on CX before, during and after the point of sale. In retail, Amazon and Apple are often cited as the textbook examples of how being customer centric can achieve great results. An important thing to note about being customer centric is that it is typically a "top down" approach. For example, Amazon CEO Jeff Bezos is famously obsessed with CX and Apple's former CEO Steve Jobs was known for wanting to get every touch point of the customer journey just right.
For Australian banks to make serious changes to their culture, leadership will need to create a clear set of principles to govern all decisions and behaviours. These principles will need to be ingrained with senior management, who should be rewarded for sticking to them and face punitive measures for straying from the company's course.
Working down, the principles should be passed on through training and frontline bank staff should be and feel empowered to provide customers with the right information and services.
For example, Australia's Bendigo Bank has been putting serious effort into its customer centric strategy. Last April, Bendigo rolled out a company-wide measurement framework designed to source the customer's voice and then turn that data into actionable initiatives.
“When our MD got up and talked about that [customer centric approach] to the organisation, he drew an adhoc diagram where he put the customer at the top, the core structure underneath that and the MD’s office at the bottom. It’s simplistic but it resonated with the organisation in terms of how we’re trying to position ourselves,” Bendigo's head of customer voice Ian Jackman said at conference last March.
#2 Increase Transparency
Transparency lies at the heart of trust. A recent survey by Ernst and Young found a strong correlation between customer trust in fee transparency and the likelihood of recommending their primary financial service provider to others.
The challenge here is the gap between what the bank believes is transparency and how their customers perceive it. For example, a bank might believe fine print or standard terms and conditions disclaimers are transparent enough. But for a customer, who must actively search for this information, it might not seem transparent at all. A bank can overcome this by leveraging CX insights which measure customers perception of what constitutes transparency against the bank's current policy.
#3 Improve Touch Points
In today's omni-channel world it is more important than ever that banks improve the various touch points their customers deal with on a daily basis. From online, to branch, to phone, to mobile app, banks need to provide a seamless experience, which, when done correctly will help build trust.
Bendigo has also made strides in this area. In late 2016, Bendigo partnered with IBM to test and deploy services based on customer needs.
"We’ve spent a lot of time internally telling the story around being customer connected, and what that means from a customer expectation perspective," Jackman told CMO.
Jackman continues, "That is about omni-channel, seamless and integrated personalised interactions, the ability to follow their own journeys and allowing customers to choose the way they interact with us, rather than dictate the journey to them."
#4 Protect customer data
Trusting banks is mostly about believing that they will keep our data (and assets) safe. With high profile hacks and breaches making headlines in recent years, banks need to proactively show that they are stepping up their data security efforts.
This is not simply a matter of establishing protocols for when things go wrong, but a case of offering products and services that show your data is secure when no hack or breach has taken place.
"Banks should look at ways to build additional controls and security measures into customer products," Ernst and Young said. "They should also effectively communicate these “extras” so that customers have a clear understanding that their bank cares about their well-being and considers data security and privacy as top priorities in the relationship."
5# Empower staff to give high-quality advice
Coming back to the royal commission, many of the problems stemmed from bank staff giving poor advice. As we noted earlier, changing a bank's culture must come from the top, but it is crucial that the new mantra seeps down to the frontline staff.
To ensure this, banks should provide staff with adequate training, access to the right tools to help customers, and sufficient incentives to "do the right thing."
Due to the siloed nature of many banks this isn’t always easy. For example, a frontline staff member may not have instant access to a customer's full personal history and detailed financial position. To combat this, banks should look at integrating data across silos and empowering staff to deliver better CX.