12 Jun 2023

  • Financial Services

The trust crisis spells opportunity for financial services

Our recent research confirmed why investing in customer trust is both worthwhile and urgent. It makes your business resilient during turbulent times.

  • Claire Barrett

    Senior UX Consultant

    Claire Barrett

This is the first blog in our series on customer trust. We’ll pick apart this complex topic, helping you to build competitive advantage by deepening customer trust.

It’s both worthwhile and urgent. Trust makes your business resilient during turbulent times.

“I’m torn between who I trust the least”

I recently led some qualitative research to better understand customer trust, by conducting one-to-one interviews and surveys with banking customers.

Our findings supported the idea that there’s a trust crisis. Trust in big institutions is low, especially in those that hold power such as government, media and business.

The customers we spoke with believed that big institutions were were ‘in it together’, controlling an unfair system.

I’m torn between who I trust the least because they’re all intrinsically linked.

Financial services did not fare well.

They’re all trying to control the system or the economy. And financial services are trying to control your money.

It’s conspiracy thinking maybe, but it would be unwise to dismiss the sentiment.

Distrust is society’s default emotion

To rebuild trust, we need to first recognise the size of the challenge. The 2022 Edelman Trust Barometer suggested that distrust is now society’s default emotion:

Nearly 6 in 10 say their default tendency is to distrust something until they see evidence it is trustworthy.

It’s not a great picture. This is the moment in a future episode of Cautionary Tales when Tim Harford laments: “There were plenty of warning signs for firms paying attention. Most were not.”

There isn’t a switch you can flick

Here’s the problem: if customers don’t trust your firm then you’re in jeopardy. A single regulatory change, competitor launch, or trust transgression could sink your business. Just ask Silicon Valley Bank.

There’s no emergency trust lever to pull when the iceberg hits. To stay relevant and resilient in turbulent times you need to consistently – methodically – build customer trust.

It’s especially urgent for Financial Services firms because it’s going to get easier for customers to jump ship.

  • With the Consumer Duty, the FCA is determined to increase trust in the industry. One of its aims is to eradicate ‘lock-in’, by requiring firms to make it as easy for customers to leave their products as it is to sign up.
  • Before long, Open Finance will create entry points for eye-catching disruptors who can give consumers more options and more control over their choice of service providers.

So let’s look at where to start. There’s a clue in Edelman’s summary: the design challenge is to evidence your trustworthiness to customers.

Trust increases acquisition

When we redesigned The Co-operative Bank’s credit card marketing pages, we gave equal weighting to the positive and negative aspects of the product. Rather than recoiling at the sight of the overdraft charges, increasing numbers of people became customers.

There was information that they wanted to see, and we’d made it easy for them to see it. When we asked customers to use our prototypes they told us they found them ‘transparent’ and ‘reassuring’. That built trust, and when the new journey went live the transparent and reassuring designs made customers ready to buy. The bank had previously known where customers were dropping out of the funnel, but not why.

Our qualitative methods revealed the cause of the problem, the opportunity, and then the solution.

Trust reduces attrition

Trust is key to retention too. To illustrate how, let’s consider the factors that affect whether customers leave for a competitor’s product or service.

We can categorise these switching factors as positive or negative reasons for customers to stay ( ‘drag’ factors) or leave (‘push’ factors).

Positive reasons to stay include trust and product benefits. Negative reasons to stay include inertia to change and fear of the new. Positive reasons to leave include switching incentives and the benefits of the new product. A significant negative reason to leave is issues with your current provider.
Pre-Consumer Duty, many firms rely on negative drag factors for retention

In our research we learned that some factors – including trust and product benefits – tend to have more influence. We’ve made those elements bigger. It shows that building trust is worthwhile because the positive drag factors exert more influence than the negative factors. Trust makes your business sticky!

The impetus

Building trust is also urgent, because the Consumer Duty will further diminish the main negative drag factors. Let’s take a closer look at them.

  • Inertia to change Inertia is a common drag factor for financial products because they tend to have vaguely-understood cancellation features and complicated switch processes. The FCA has these ‘sludge practices’ in its crosshairs – it intends to reduce their use and their effects.
  • Fear of the new We tend to fear things we don’t understand, which is one of the reasons why the FCA has made Consumer Understanding one of its four Consumer Duty outcomes. Your progressive competitors are likely embracing this shove and making their own product benefits crisper, clearer, and more appealing at point of purchase, as the Co-operative Bank previously did.
The two key negative reasons to stay – inertia to change and fear of the new – will have less influence in future
With the Consumer Duty, firms can’t rely on negative drag factors for retention

If you rely on inertia and fear of the new for retention then your business is at risk.

Trust is your best defence. Customers with high levels of trust your firm have more positive reasons to stay, and so are less vulnerable to your competitors’ charms.

Invest in customer trust today

Trust is hard to build, yes, but that’s what makes it a superpower.

And we have the qualitative tools fit for the job – let’s use them to steal a march on your competitors, before they do it to you.

Where to start?

If you want to hear more about our research, or understand how customer trust is impacting your business then drop me a line – claire.barrett@cxpartners.co.uk – I’d love to chat.

Our next blog in this series is about prioritisation

How do you identify the situations when trust is most important to customers? We’ve identified three contextual factors that can help you decide where to focus your resources. Follow cxpartners on LinkedIn so that you don’t miss the next blog in our trust series.

Learn more about The trust crisis spells opportunity for financial services

Stu Charlton

Reach out to Stu Charlton

Strategic Director

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