Bridging the Trust Gap in the Banking Industry

After a Great Recession fueled largely by the crises and scandals of the financial sector, it’s not surprising that Americans are feeling less than enthusiastic about the nation’s banks. In fact, Gallup’s most recent poll of public confidence in 16 major institutions, from the presidency to the police, revealed that only 21% of Americans have a great deal or quite a lot of confidence in the banking industry. This is a record low for banks: to put it within context, only HMOs (19%) and Congress (13%) came in lower.

It is also the greatest decline of confidence in any institution relative to its historical average since Gallup first starting asking this question in 1973. And yet, the reality is that American banks are in much better shape today than they were prior to the economic crisis of 2008 and 2009. Nevertheless, there still remain areas of concern within banking and within the financial sector as a whole. The banks included on Forbes’ list of Most Trusted Companies are smaller regional banks, all of which have balance sheets as healthy as the trust level of their customers.

The root of this discrepancy is the result of banks and financial companies failing to compellingly shape and tell their stories. While these institutions have strengthened their balance sheets in recent months, they have made little progress in clearly communicating the social value of their improvements.  They have failed to address their stakeholders’ concerns, including investors, customers, politicians and regulators, and the consequences of this failure could be profound.

Every industry must succumb to the cycle of brand rebuilding at some point. Just look at the tech boom of the early 2000s. Every week, there was a new startup that was going to revolutionize the way we lived and worked. Many received vast amounts of funding because, in the minds of those with capital, these companies could do no wrong. Yet the life cycle of many a tech start up could be measured in weeks, not years. As a result, a trust gap developed throughout the entire industry. Aside from Apple and Google, many industry analysts and investors doubted the sustainability of even the most successful tech companies, as evidenced by the lackluster Facebook IPO.

But Facebook’s stock has rebounded significantly, mostly because they were able to clearly address the concerns of those who wondered how they could effectively monetize their service. In that respect, Facebook had two masters to serve: its nearly one billion users who were concerned about having their data used to influence the company’s balance sheet and its investors who needed to understand the long term business model that would provide a return on their investments. Facebook effectively addressed the concerns of both audiences by clearly communicating the company’s vision, strategy and its meaning to both users and investors. This approach accomplished the most critical goal of restoring trust in the company.

Analysts warn that the banking sector is facing a similar crisis of trust, predicting higher capital costs and more cuts in jobs and bonuses. Under pressure from regulatory forces and technological transformation, financial institutions are facing a period of historic change that can only be met and managed if they regain the trust of regulators, investors and customers.

To create a strong foundation for sustainable growth, banks will need to both understand and address the concerns of many key constituents.  We’re already seeing the beginnings of this brand rebuilding phase among banks that are touting the human elements of their commitment to customer service. Unfortunately, that message has become diluted as more banks latch onto it during their customer-facing communications, making the unique message of each bank indistinguishable from the others.

It’s fine for banks to tout service when talking to customers, but that’s only one element of the trust gap. Protesters, however ill-informed, were not camping out in Zuccotti Park because of a frustration with voice prompts or difficulty in navigating websites.  Banks had let their message escape them, and their audiences simply distilled disparate and often inaccurate information through their own filters, which created a negative brand image for the entire industry.

Banks are embarking on a new era of brand rebuilding, which requires a commitment to strategic communication with a clear message that’s reinforced by a deep understanding of the levers and mechanisms influencing each audience. The message for current or potential customers is completely different than one for analysts and media on an earnings call, yet both audiences are equally significant.

The trust gap can be bridged, but it’s going to take more than a clever commercial to do so. Banks have an obligation to their shareholders and customers to deliver on their brand promise, but this requires clearly communicating that promise to each audience. Larger banks should look to their smaller counterparts that have been included on the Forbes list to understand the value those smaller companies communicate to customers, shareholders, analysts and media. In doing so, they have the opportunity to positively transform both their brand perceptions and bottom lines.