The financial industry has a trust problem.
In 2023, only 2% of U.S. financial brands were considered “strong” when it came to customer trust. What’s more: a recent J.D. Power study revealed that consumer trust in retail banks has been on a steep declineover the past two years. Surprising? Maybe not, if you yourself ever had a negative experience with your bank.
Just think of a time when you called about an unauthorized charge on your credit card, only to be put on hold for what felt like hours, wondering how it even happened in the first place. It’s all too common to spend weeks going back and forth with a bank over a relatively minor issue. And it’s not the potential fraud that is most frustrating—it’s the feeling that the bank isn’t taking the problem seriously.
So, how did we end up here? And how can banks start winning back customer confidence?
Why Has the Financial Industry Lost Consumer Trust?
We’re living in strange times. Inflation, economic uncertainty, and market volatility have made consumers pinch their pennies. Add to this a series of well-publicized scandals and fraud incidents, and it’s easy to see why trust in financial institutions has plummeted.
In 2023, Bank of America, along with other major banks, faced significant backlash as Zelle fraud cases spiked. Customers were reporting unauthorized transactions that took weeks, or even months, to resolve. And who could forget the 2016 Wells Fargo scandal? In this high-profile case, millions of fake accounts were created by employees who were under intense pressure to meet sales targets. This led to billions in fines and countless customers feeling betrayed. When trust is eroded on such a large scale, it leaves a lasting impression, not just on Wells Fargo’s and Bank of America’s customers, but on all bank customers.
The Erosion of Consumer Trust in Banks
The constant barrage of fraud is not doing the financial industry any favors in terms of trust. A recent survey shows that 92% of people believe fraud has increased in recent years, and 67% have even witnessed it in their own lives. The same survey had 95% of respondents responding that they are concerned that AI will worsen fraud. Worst of all, while 48% of respondents trust their credit card companies to handle fraud, only 36% believe banks will do the same. One 2024 poll reported that 80% of consumers worry about fraudsters stealing their card info, a 19 percentage point increase since 2023.
Another big problem is overall poor customer service. Issues like hidden charges, delayed fund availability, and inconsistent service quality make customers feel that banks don’t care about their well-being. According to J.D. Power, nearly 29% of customers reported that excessive fees were their primary reason for switching banks, and 26% of customers said that they were leaving their current bank due to poor service like limited hours, over-reliance on digital interaction, and closing bank branches.
Why Does a Lack of Consumer Trust Hurt the Financial Industry?
Unsurprisingly, this lack of consumer trust affects financial institutions in a big way. Unlike many other businesses, banks deal with highly sensitive and personal information. People need to believe their data is safe and that their bank will act in their best interests. When consumer trust is high, customers are more likely to share personal data, creating opportunities for banks to provide better services, introduce new products, and enter new markets.
Without trust, banks struggle to maintain relationships and risk losing customers to competitors who offer a greater sense of security. For example, 70% of consumers consider fraud protection features and policies when choosing a credit card, and 67% of respondents consider fraud protection features when choosing a bank. What does this mean? If banks don’t earn their potential customers’ trust, especially when it comes to fraud prevention, they will lose their business.
If a bank can’t expand its customer base, it limits its ability to grow and evolve in terms of technology and product offerings both. And in the long run, it’s the consumer who loses out, as banks end up less equipped to help them achieve their financial goals.
How Financial Institutions Can Gain Back Consumer Trust
Fortunately, it’s not all doom and gloom: in surveys, consumers have been vocal about what it would take to regain their trust. Consumers have cited transparency, stricter codes of conduct, changes to rules, improved internal governance, more information on products and services, and more as changes that would help gain their trust. Luckily, that leaves banks with a lot of material to work with as they try to convince customers to give them a second chance. Let’s break these results down into categories:
Transparency
One way that banks can begin regaining customer trust is through greater transparency and consciously ethical practices. When employees have a clear code of conduct and there are fair remuneration practices in place, it sends the message that the bank values integrity and customer care. This is particularly important in an industry with such a dark history of scandal.
Regulation
Keeping up with regulations is also crucial. New rules and record fines are being introduced constantly, and banks must adapt swiftly to stay compliant. Rather than viewing regulations as burdens, banks can embrace them as a means of building trust. For instance, banks can implement regular compliance training for employees and review their processes to ensure they meet legal standards.
Proactive Customer Engagement
Customer engagement is another area that’s ripe for improvement. Many customers only hear from their banks during promotions or when there’s an issue with their account. By investing in robust communication programs and improving customer service, banks can build relationships with customers beyond transactions. Financial education programs can also be beneficial, helping consumers make informed choices while fostering a sense of trust.
Proactively solving customer problems is another key to rebuilding trust. Banks should prioritize data security, not just because it’s required, but because it’s what consumers value most. Offering cutting-edge fraud prevention tools can help. One example is Ellipse Verification Code (EVC) cards, which offer advanced protection through a changing security code on the card itself, which reduces the risk of card fraud. Investing in these kinds of solutions shows consumers that banks are taking their concerns seriously and are committed to protecting their assets.
Ultimately, the banking industry must rise to the challenge before them. Banks should aim to serve a higher purpose beyond profit: helping customers manage their money in a way that’s accessible, fair, and beneficial to all parties. It’s time for banks to become partners in their customers’ financial well-being. In return, the customers just may begin to love their bank right back.
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