Big Bank Brands and the Customers Who Dont Trust Them

It seems like a contradiction in terms: a brand  value based on the lack of customer trust. Provided with that information alone, there is probably no one in the developed world (or developing world, for that matter) who wouldn't quickly guess the subject is banks.

They seem to keep attracting deposits and making profits despite rather than because of their reputation and brand.

The answer lies squarely within that contradiction: if you can continue to attract business in the face of hostility and mistrust, imagine what you can do when the situation improves?

The reality is, as the following article explains, that people do business with banks due to a lack of alternatives, not because they like or want to do so. In fact, as the data suggest, they do so understanding that the banks are going to do everything in their power to mislead and work against their customers' interests. The article's information dates back two years but more recent studies on similar issues suggest the same forces prevail today.

The implication is that the situation is not, in fact, that beneficial for the banking industry. Customers factor the absence of trust in to their dealings with the banks by attempting to limit their interaction and building in protections so that their assets are as insulated as possible from the bankers' perceived depredations. this state of affairs is maintained, in part, by the financial services industry's reinvestment in political influence which has, to date, prevented the emergence of effective alternatives to the current model. But moods and needs change. 

All of which suggests that the banks are one disruptive innovation away from obsolescence.

The Financial Brand.Com reports:

Three separate studies indicate there are significant contradictions between how big bank brands are valued, what consumers feel about large financial institutions, and where consumers choose to bring their deposits

Brand Finance, a independent brand valuation consultancy, says that the top U.S. bank brands recovered during 2009, with an overall increase in brand value of +29%. According to Brand Finance, BofA saw its brand value grow to $26.1 billion, up by +24% over 2008.

Reality Check: These guys had the value of their brands kicked to the ground in 2008. The percentage gains in 2009 may look impressive, but many of the world’s biggest bank brands are still worth a lot less than they were pre-meltdown, and some are still on their knees.
The Brand Finance study tries to quantify the price premium each bank can command for its products and services. The assumption is that Bank X has a stronger brand than Bank Y if Bank X is able to charge more for the same product or service.
Most studies, including this one from Brand Finance, attempt to quantify the financial value of brands while ignoring what those brands are really all about — consumer’s feelings, perceptions and goodwill.
Key Insight: The power of a brand’s profit potential hinges entirely on the degree of influence the brand has in consumers’ purchasing decisions.
If the value of brands was determined by how much people trusted them, these types of studies would tell a markedly different story about banks. Like this next study…

People trust the big banks least

A New York Times article titled “The Least-Trusted Banks in America” cites a Forrester Research study that found customers of the biggest banks in the US don’t believe their financial institution does what’s best for them, but instead does what’s best for their bottom line.
In Forrester’s annual “Customer Advocacy” study, the research firm asked 4,500 bank customers whether they agreed or disagreed with this statement: “My financial provider does what’s best for me, not just its own bottom line.”
Credit unions were the most trusted financial institutions in the U.S., with 70% of members saying their credit union looked out for their best interests. After credit unions, USAA’s bank came in second, with 64% of its members saying the organization was trustworthy.
Key Question: If a brand cannot be trusted, how can it have any value? Banks are consistently among the least-trusted brands in Forrester’s study, but this year, HSBC broke a record. The world’s biggest bank got the lowest customer advocacy score ever reported in the U.S., down a full 10% over last year.
Meanwhile, Brand Finance says in its study that HSBC’s brand value rose 12%. Something weird is going on here. But wait, it gets even weirder…
Consumers put deposits — not trust — in banks Consumers may say they don’t trust big banks, but that apparently isn’t enough to stop them from bringing in their deposits.
Despite near record-low APYs in 2009, the 10 largest U.S. banks posted higher deposits in the fourth quarter for the first time since 2005. JPMorgan Chase posted an 8.1% rise to $938 billion. US Bancorp said deposits rose 7.9%.

Bottom Line

According to these three studies, it seems a big bank’s brand value hinges on how well it continues to attract customers who are willing to pay a premium despite their lack of trust in the institution. Translation? Big bank brands are worth more because consumers expect to get bent but bring their business to them anyway.