Banks are swiftly transforming in a world where 76 percent of Americans prefer mobile applications to teller windows and digital wallets are quickly replacing cash in pockets. However, it goes beyond just enhancing digital services. Financial institutions must redefine their values and earn the trust of their customers as a result of a culture transformation.
In banking, trust has always been important. But ever since the 2008 financial crisis, when it became evident that banking practises weren\’t always in clients\’ best interests, it has been a particularly contentious topic. According to Anthony Lipp, IBM Global Head of Strategy for Banking and Financial Markets, \”the sector did try to claw back a good 10 years after that to say, \”We are regaining trust with clients.\”
A Trust Investment
When COVID-19 struck, an opportunity to establish trust for customers\’ unforeseen demands accidentally materialised. Banks had to come up with new ways to interact with clients as branches abruptly closed over the world. Financial institutions had to skillfully replace in-person interactions and other human interactions with more technologically advanced solutions when assisting customers with loan applications or new account opening. For instance, banks relied more on automated chatbots to handle the massive volume increases when call centre volume increased by as much as 400%.
This quickening of the digital revolution ushered in a new, more intense emphasis on the needs of the customer.
Trust that is regulated versus unregulated
U.S. banking regulations have changed continuously since the First Bank was founded in 1791, following the 1929 stock market disaster, the sub-prime mortgage crisis, and other events to reduce risks (such as financial instability) and safeguard customers. Banks are entrusted with protecting the private and confidential information of its customers.
Banks must also seek to develop \”unregulated trust,\” or trust that goes beyond what is needed by law, as Lipp calls it. Does the financial institution act in the client\’s best interest? Or is it causing conflict that frequently results in fees or hidden costs?
The Consumer Financial Protection Bureau estimates that banks levied overdraft and non-sufficient funds fees totaling $15 billion in 2019 and that credit card issuers charged $14 billion in \”punitive\” late fees.
According to Lipp, \”Unregulated trust needs establishing a financial relationship that is more transparent.\” Customers want to see how a thing is made from beginning to end.
This is difficult in a sector where corporate procedures have typically been ambiguous. Consider house loans, which normally follow a 12-step procedure. The consumer must laboriously complete the application, which is then placed in the eerie, mysterious \”processing\” phase. Banks are increasingly providing online platforms for customers to log in and monitor their transactions.