In October 2010, a Gallup study revealed that Americans’ trust in banks had fallen to an all-time low of 18% — lower than its level at the height of the global financial collapse.
In 2011, 86% of opinions shared on social media about U.S. (and European) banks were negative. That same year, Market Watch named Wells Fargo CEO John Stumpf “the best performing CEO on Wall Street.” According to Mr. Stumpf, “It is all about the team.”
The overall reputation score was based on feedback from both customers and noncustomers encompassing seven categories that influence perceptions of reputation: products and services, innovation, leadership, workplace, performance, citizenship and governance.
Synovus was at the top of the reputation ranking with a score of 80.7 on a 100-point scale. It also had the highest or second-highest score in each one of the seven categories.
Banks continued to gain trust and increase their reputations from 2011 to 2017.
Fast forward to 2018. According to the American Banker, the annual American Banker/Reputation Institute Survey of Bank Reputations claims: “Bank reputations fall for the first time in five years…” The increasingly positive perception they had enjoyed in the years following the 2008 financial crisis is eroding.
And, if I may add, for good reason.
Overall, the banks’ reputation score with customers fell by 3 points, to 76.6, which is considered “strong.” Among noncustomers, the score dropped 3 points as well, to 62.5, leaving them at the low end of the “average” range, in which reputation, while not harmful, is of little use attracting new customers.
According to Bradley Hecht, a senior managing director with the Reputation Institute, “The trust level of banks has continued to drop relative to what it was before, to the point that less than half of customers and just a quarter of noncustomers give banks the benefit of the doubt in a crisis situation.”
The survey points out that scores for regional bank reputations as a group fell down the most. However large banks are behind other types of banks by a significant margin. Based on customers’ scores, Synovus has dropped to 10th place, Wells Fargo is in 40th place.
USAA Bank earned the top marks in reputation among both customers (87.0) and noncustomers (73.8).
Its president, Chad Borton, said, “Building and maintaining trust with our members over the long term is central to everything we do. It’s embedded into our model; it’s embedded into our operating rhythms.”
As the survey points out, there is an increased expectation in our banks demonstrating corporate responsibility. Mr. Borton noted that last year USAA committed to spending over 50% of the money it invests in philanthropy to supporting the families of military personnel facing challenges related to deployments and other stresses inherent in military life.
“More recently” he added, “the bank committed to donating 1% of its pretax profit to its corporate responsibility programs.”
A surprising outcome of the survey was the finding that if customers are familiar with the CEO of the bank, reputation scores were six points higher. Among noncustomers CEO familiarity accounted for a 7.7 point increase in reputation score! Yet 17% of individuals surveyed said they were not familiar with the CEO of their own bank and only 7% recognized the name of a CEO where they do not conduct their bank business.
Mr. Hecht believes “No longer can the CEO hide behind the curtain… No longer should they only talk about financial performance and product.”
The message in the survey is that, with an increasing distrust in corporations overall and banking industry scandals at major players like Wells Fargo adding to the general distrust, “it is more important than ever for banks to demonstrate a sense of social responsibility and care for their customers. And bank CEOs are the single best voices to deliver that message.”
“We know that the opportunity is for the CEO to link things like financial performance and product to societal impact and innovation,” Mr. Hecht stated, “Among CEOs who are most successful at doing that, their banks are more reputable, their customers like them more and their noncustomers are more likely to go to them versus other companies.”
The survey found that in an era of increasing consumer distrust of corporations in general, worsened in the banking industry by scandals at major players like Wells Fargo, it is more important than ever for banks to demonstrate a sense of social responsibility and care for their customers.
Banks especially need to show good corporate citizenship given that they are making large profits — something not lost on customers — even as their reputation has declined.
Mr. Hecht pointed out, “What we’re finding is that the more profitable banks become, the higher the expectation and the responsibility on behalf of banks to take that profitability and use it to reinvest in areas of society where they can have a positive impact.”
The survey points out that, for the first time ever, perceptions of a bank’s good citizenship is one of the top three drivers of overall reputation with customers and noncustomers. Customers rate a bank not as much any longer on risk factors such as data breaches and system failures but on how the bank treats its own employees.
The top five risk factors for reputational damage were:
- A failure to pay female employees at the same rate as their male counterparts
- Unequal opportunities for employees by either race or gender
- Fining or punishing an employee who blew the whistle on internal wrongdoing
- Inappropriate behavior by management, including sexual harassment
The survey clearly shows how important a bank’s building trust is among the general public as well as with its customers. Transparency, honesty and overall corporate citizenship and corporate responsibility appear to be the new revenue drivers.
Will most banks be able to make the adjustment from being profit-driven first to good customer and employee relationships which, in turn, impacts their profits? They will if they want to retain customers and public respect.