How is trust the new currency in banking?

X-Archived    | October 11, 2018

Nearly half of customers send personal information using email and trust the safety of an email in 30 seconds or less. But is this trust warranted?

When questioned, only 40 per cent of organizations who have encryption capabilities use the technology extensively to protect sensitive data – with a third of emails which should be encrypted being sent over open lines. More worrying is that most data breaches go undetected, and that 61 per cent of employees admit sending confidential information in unencrypted emails.

Trust is critical

Mark Carney, governor of the Bank of England, says that maintaining public confidence and trust is the primary role of central banks. In addition, the “past, present, and future” of financial institutions depends on public confidence.

And to be trusted, according to a recent Javelin report, a bank must be reliable in how they protect sensitive customer data. This reliability translates to how personal data is stored, the proactive measures in place to prevent unwanted access to their accounts and the compensation formulas in-place in the case of loss or fraud.

Will GDPR have an impact?

With the recent adoption of the GDPR in the EU, institutions will now have to publicize any breach within 72 hours. This will almost certainly affect consumer perceptions about banks and their safety measures, particularly since public perception is at odds with reality in this regard: 1 in 4 institutions have been hacked, yet only 3 per cent of customers believed that their own institutions had suffered this fate. Speaking about the ephemeral nature of trust, Mark Carney has said, “Trust arrives on foot, but leaves in a Ferrari.” In the wake of GDPR, more institutions may come to understand this.

Customer data: an asset and a liability

Trust in financial institutions leads to more customers being willing to share their data. 60 per cent of consumers are willing to trade personal data in exchange for benefits – lower pricing on a financial product, for example. Millennials are the group that is the most willing to share their data; they are also the group that is the most aware of their data, and how banks collect it. Baby boomers and the elderly do have high levels of trust, but this does not translate into a willingness to share data.

Financial institutions know that 65 per cent of customers choose their financial institution based on privacy and security. And, as a result, over half of customers trust their primary financial institution.

But how durable is trust in the event of a data breach? 86 per cent of customers indicated that they would switch their financial institution if it suffered a data breach, and those that place a premium on privacy and security would be well-placed to acquire some of these customers.

In reality, of course, many customers would find switching providers to be an inconvenience. But while these customers might not leave, they would still limit their business: 35 per cent of customers said they would reduce the number of transactions they make; 28 per cent would redistribute some assets to another provider; and 28 per cent would be cautious about making additional investments with their institution. In all these scenarios, the bank would experience a financial impact.

Banks can still build digital trust

There are many ways for banks to build digital consumer trust, which in turn will result in greater customer engagement and retention. Here are some of the most critical:

1. Focus on the customer. Banks should focus on digital services that customers need and that are in their best interests. This customer-centric view should be evident at every level of the institution.
2. Remove friction. Remove errors and streamline digital services. Work to understand why customers are having difficulties: this will help ensure lasting resolution is obtained.
3. Brand secure communications. Customers should never be confused by digital communications, from fees to e-statements. Malicious emails mimic your legitimate communications to trick your customers. Any secure communications need proper branding and language options.
4. Protect customers. Put policies in place to protect data and guard customer privacy. Actively defend against cybersecurity threats using proactive measures – like encryption.

Trust brings customers and encourages them to stay. Trust lets banks gain access to the information that helps them improve their services. Trust is the currency that customers value above all else. There can be little doubt: institutions that embrace trust, that make it central to their way of doing business, will thrive, even in a challenging landscape with ever-evolving threats.

Source:

https://www.bloomberg.com/news/articles/2018-05-25/boe-s-carney-says-central-banking-comes-down-to-trust-in-money

https://www.javelinstrategy.com/sites/default/files/18-4003J-FM-2018%20Trust%20in%20Banking%20Awards%20Whitepaper.pdf