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Ogres to angels

Banks have a chance to shine

There remains much cynicism about the banking sector but there is an opportunity (based around support) for banks to help repair a customer trust shortfall.

Robert Seffert Associate Director 26/04/2023
Only three in 10 trust their own bank as a source of advice, preferring to turn to trusted online sources or friends & family.
The cost-of-living crisis bites in everyday life

According to the Office for National Statistics, 93% of adults in Great Britain reported an increase in their cost of living in March 2023. And whilst the Office for Budget Responsibility is predicting inflation to fall throughout 2023, many are predicting the cost of living crisis will remain with us this year and into next.

In Savanta’s latest Consumer Compass report, our Consumer Confidence Index (CCI) shows a positive uplift at the start of March, but still remains in negative territory, reflecting the continued impact of the crisis.

Consumers coping mostly through spending life savings, but also through debt

The main way consumers continue to fund bills and purchases is by drawing upon their investments and saving. Though, many have now turned to debt to cope with the increasing cost of living. The use of buy-now-pay-later & borrowing is increasing, reflecting the dent in disposable income levels.

And cutting back on investments and protection for the future

Four in 10 are limiting, or considering limiting, their savings in some way and around one in five are limiting their investments, pension contributions and protection for the future.

One in five don’t feel knowledgeable about tools to manage the cost of living

Whilst four in 10 claim they feel knowledgeable about where to go for advice, tools and options to assist in managing the effects of the cost-of-living crisis, a significant minority – one in five – do not feel knowledgeable.

A third say they are ‘neither’ knowledgeable nor not knowledgeable – a sizeable portion of consumers exist who have some level of knowledge, but fall short of a comprehensive understanding of what support is available to them.

Financial institutions have a clear opportunity here to demonstrate customer care through education.

Only three in 10 trust their bank for advice

Only three in 10 trust their own bank as a source of advice, preferring to turn to trusted online sources or friends & family.

However, banks and financial advisers are trusted more than the government, with ‘my bank’ and ‘charities’ considered on par.

Banks should aim to build trust, by providing timely and helpful advice. They should avoid the temptation to purely sell or engage in the hard sell, rather they should provide customers with care and support now, to grow the relationship longer term. This may reap benefits in customer loyalty and future product uptake once the crisis is seen to diminish.

But one in four think banks should be doing more to advise

When we asked which entity consumers thought should be doing more to provide information and advice (relating to how to manage personal finances in the current cost-of-living crisis), aside from the government, banks were the next highest mention –

  • ‘Banks generally’ – 24%,
  • ’My bank’ – 23%.

Banks have the most room to offer support – an opportunity, an open door?

How banks should get involved

Consumers are focusing on their immediate needs, raiding their savings, cutting back on investments and protection and increasing their debt to fund their current requirements.

This focus on short-term needs may well be damaging longer-term financial planning. Appropriate timely advice will help consumers mitigate these risks, or at least help manage them better (e.g. limit indebtedness and help protect credit worthiness).

There’s a consistent majority that do not feel knowledgeable about the financial advice and tools available to help them. However, this is not driven by a total lack of knowledge, but by a knowledge shortfall.

Consumers have some understanding of financial elements but lack what they feel they need to build a firm broad knowledge base to make effective financial decisions. This presents an opportunity for financial service providers to offer support, without having to build the consumer’s knowledge base from scratch.

A significant minority trust their bank to help with tools and advice to manage costs, but the majority do not. Banks therefore need to build their profiles as impartial advisers, supporting individuals in times of need, rather than profit-hunting for their own gain. This could serve the dual purpose of resolving a consumer ‘knowledge shortfall’ (generally) and a ‘trust shortfall’ in banks.

With a quarter believing banks should do more to advise, this is a great opportunity for banks to demonstrate commitment and care to customers and non-customers alike.

The resulting support could see increased product uptake, increased customer loyalty/retention and non-customer consideration.

Once upon a time, banks were seen as the big bad ogres, could they now step up and become angels to help save the day?

Download the full report

And if you’d like to talk to our financial services team about this topic and see how we can support your strategy to becoming trusted advisors, get in touch: [email protected]

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And if you’re preparing for the updated Consumer Duty regulations, check out our new blog series: Navigating Consumer Duty, featuring: Consumer Duty: everything you need to know, Optimising your comms testing, Measuring true understanding.

Research used in this report

To carry out this research, we combined data from our Consumer Confidence tracker (2,000+ UK consumers) and our Consumer Omnibus (2,100+ UK consumers). To find out more about these products, click here and to read our latest Consumer Compass click here.

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