Thirdly and crucially, low customer trust is impeding banks from offering the kind of advisory services that customers clearly need and that hold the potential of creating new revenue streams. While most consumers and SMEs alike trust their banks to protect their data and execute their transactions correctly, there is a significant gap between that and their level of trust that banks will look after their long-term financial well-being.
An in-depth analysis of the consequences of this trust deficit revealed that 5 percent of retail banks’ revenue is at risk. This is the “bad revenue” derived from services that have hidden or opaque fees, or that result directly from customers’ poor financial habits and decisions. It is also the revenue that is being targeted by innovative new competitors and by regulators.
Low trust also makes it difficult for banks to capitalize on the potential 9 percent increase in revenue which we calculated the average retail bank could achieve by offering innovative digitally enabled advisory services.
The COVID-19 crisis is the ideal time for banks to show customers what they can do for them on their best day. Many have done great work under difficult circumstances. But as our survey shows, while trust levels have both risen and fallen among different groups of customers, the net result is banks have not succeeded in moving the dial in their favor.
As banks address their immediate priorities, they should also consider their future. Will they revert to business as usual or redefine their role, helping customers become more proficient at managing their finances? What new capabilities and attributes will they need? Where will growth come from?
We believe purpose-driven banking holds many of the answers.