In the past year, we have seen Australian banks attempting great innovation in the financial technology space. Just a few weeks ago, ANZ signed an agreement with tech giant Apple to offer Apple Pay to its Australian customers. Macquarie recently announced expanding into retail banking with an innovative customer experience technology solution.
Banks are digitising at a quick pace and rapidly rolling out new services in a brave new fin-tech world. Technological innovations are disrupting, challenging and optimising the banking industry, but in the digital arms race to create new digital payment systems and offer more online services, banks need to put old-fashioned trust at the heart of their digital roadmap.
The business value of trust to banks cannot be overstated. Loss of trust, particularly in the way customer data is managed and used, can damage reputations, while those that can build and maintain trust are getting a considerable edge.
Trust erosion in the era of exponentially increasing data
As financial services are digitising, financial services organisations are collecting and using an ever increasing amount of personal and digital consumer data to build and deliver innovative services and personalised experiences.
But in the data collection race, banks must be alert to the risks that come with having so much data. Any data breach or unauthorised access or use of data can lead to erosion of consumers’ trust that can have a significant negative impact on sales, loyalty, and customer retention.
Over the past 12 months alone, we’ve seen examples of reputational challenges involving global and Australian banks, brought about by data leaks and breaches. Although consumers — especially millennials — are willing to give this data away in a quid pro quo exchange as the cost of doing business, they place trust in financial institutions treating their personal information in an ethical and secure way. In this context, trust is becoming a prominent factor in consumers’ purchase decision-making process. Digitising without paying attention to building and maintaining trust can have long-term repercussions.
The business value of trust
Consumers trust you or they don’t. If they feel that their trust is impacted, they will likely move on to another brand. In an increasingly global financial services market, Australian banks need to watch out for international players and young digital upstarts that capture the attention and trust of consumers.
According to a recent APAC study, a third of consumers would be likely to switch their banks if their trust was compromised, and almost half of the consumers in the APAC region said they were willing to switch to a digital start-up if they trusted their approach to data ethics and processes. Additionally, nearly half of the Australian consumers surveyed reported that they would be willing to pay a premium for products and services from companies they trust.
The key parameters for building and maintaining trust
Whilst gaining trust can take a long time, it can be lost in one transaction or event that a customer may or may not be directly involved in. Trust can be influenced by many factors. While many of these factors are intangible, there are three key parameters that drive the ‘trust mix’:
1.Show consumers a return on the value of their trust
It’s not that consumers are not willing to share their data; in fact, consumers are increasingly open to sharing data about themselves. Only, they need something in return, whether it is better customer experience, personalised content or relevant promotions. We call this the ‘give-to-get’ ratio, and it is essential in building a trustworthy relationship with consumers.
2.The ‘trust factor’ as a business KPI
Trust has to become a C-suite issue as it converts directly to bottom-line benefits. It needs to be addressed at all levels of the organisation, and every manager and employee should be empowered to build trust when interacting with customers. Only by making consumer trust a business KPI metric that’s measured can it be fully translated into something concrete and add value to the organisation.
3.Modelise a ‘trust equation’
Trust can be influenced by many factors. While many of these factors are intangible, one of the ways to represent the hidden mechanism of trust is to define it through tangible metrics/variables. The following equation turns this nebulous concept into something more quantifiable and actionable: Trust = (R*C*I)/SO. In this equation, R stands for Reliability, C for Credibility, I for Intimacy and SO for Self-Orientation. The first three elements correlate directly with trust and have a multiplier effect, while self-orientation undermines trust.
In the digital age, trust is a key business value that must be measured and protected. Australian banks need to embrace transparency and accountability around consumer data to maintain trust, and add trust at the core of their business strategies.
Written by Carlo Lacota, Assistant VP, Banking and Financial Services, and Manish Bahl, Senior Director, Centre for the Future of Work, Cognizant.