Rebuilding Trust in Troubling Times

By Carola Jain and Mike Rocha


The financial services industry has been through an incredibly turbulent period since the 2008 financial meltdown, and as banks continue to lurch from crisis to crisis, the adversity shows no sign of letting up anytime soon.

In the past year alone, UBS had a € 2 billion Delta One problem; MF Global went bankrupt and lost over $1 billion USD of clients’ money; JPMorgan Chase & Co reported a $4.4 billion trading loss in its chief investment office; and Barclays is the first of a number of banks to be tainted by the evolving Libor scandal.


Libor, according to MIT Professor of Finance, Andrew Lo, “dwarfs by orders of magnitude any financial scam in the history of markets.” Regulators in at least seven countries are investigating the rigging of the Libor and other interest rates, and around 20 major banks have been named in investigations and court cases. This still-unfolding story that has revealed decades of abuse, has financial experts calling for an overhaul of how the rate is set.

The old growth tricks of consolidation are hardly defensible given the general notion that large banks are not only “too big to fail” but also “too big to manage.” The Libor scandal, in particular, has intensified pressure on Wall Street to enact reform. Aside from potentially costing banks tens of billions of dollars in penalties and legal settlements, the scandal is further damaging the banking industry’s already battered image. Analysts worry that it is eroding the faith of investors and consumers whose confidence in Wall Street has been shaken by continual scandals and unsettling stock market losses.

The failure of the industry to put its own house in order means that politicians and regulators will be more inclined to step in. In the short- to medium-term, ongoing regulatory change — of which we have likely only seen the beginning — is redefining the environment within which financial brands can operate. Financial institutions’ capacity to generate returns above the cost of equity is already under extreme pressure, so business strategies and models will have to evolve rapidly — and brand strategies will need to evolve with them.

With stock prices sliding and investors’ interest waning, uncertainty weighs heavily on the sector, but the picture may not be as bleak as it seems. The demand for financial services remains strong; wealth is being generated in commodity countries; emerging markets and pension funds continue to grow.

Another reason for cautious optimism is that corporate customers have broadly stood by their banks. However, it must be pointed out that this loyalty is partly due to the absence of an industry leader that might clearly show a differentiated strategy. While clients overall are continuing to demand more transparency and accountability, on the B2B side at least, it seems that the majority see safety in size and will continue partnering with global players.

Reassuring and connecting with consumers

From a consumer point of view, trust is at an all-time low, and willingness to consider alternative providers at an all-time high. This is creating significant opportunities for new entrants, particularly trusted brands from other sectors. We expect this trend to continue and accelerate, improving choice and increasing the role of brand as competition intensifies.

The ongoing digital revolution is also facilitating change in the industry, empowering consumers, expanding their consideration sets, and enabling greater opportunities to compare value. A sense of more options and more personal control over choices, coupled with the above-mentioned trust deficit, is also speeding a trend toward declining loyalty and less inertia. Consumers are increasingly willing to make a switch, creating further opportunities for new market entrants.

Financial services has been slower than most industries to embrace the transformational potential of digital. Outside of financial services, consumers are coming to expect personalized customer experiences due to their experiences with retailers like Apple and Amazon, which have raised the digital bar. Consumers increasingly expect a rich and engaging experience from all of the brands of their life, including their financial service providers, with content that is tailored to their profiles and individual financial needs. As this demand grows, financial services brands will need to develop tools that can mine data to build more personal, relevant customer profiles at higher levels of sophistication than today. In addition, this experience will need to be deployed across all of the increasing number of channels and touchpoints.

Opportunities around the world

Emerging market growth is another global trend that will continue to provide huge opportunities for financial brands over the next ten years. Opportunities exist at each level of an emerging market society. Through increased penetration of the unbanked, financial services organizations can offer a wider range of increasingly sophisticated products and services to the growing middle classes, as well as through private banking to the growing number of wealthy entrepreneurs.

Western brands can’t simply assume they will be able to effortlessly expand into these new markets, as they will face regulatory restrictions and growing competition from emerging market-based international groups, possibly even becoming targets for acquisition themselves. While there is concern about the size of banks in Western markets, in emerging markets the race for consolidation continues, with many players seeking initially to become regional powers. We have no doubt that, in time, emerging-market financial brands will break into the Best Global Brands’ top 100.

In the next year, we expect that most financial services institutions will be primarily focused on restructuring, grappling with regulation, and on the constant hunt for revenue. Banks will be looking for new revenue sources, as will governments that are introducing new taxes that could impact corporate customers and consumers alike.

Though it doesn’t necessarily make the path forward easier, it helps to remember that times of great change — and great challenge — are also times of great opportunity. The power of brands during such turbulent times is their ability to act as the central organizing principle for their businesses, establishing clear values and principles which can guide future strategies and behaviors internally, and, over time, influence external perceptions.

For consumer banks, nothing is more important right now than rebuilding trust. To accomplish that, financial companies will need to clearly define what their brands stand for, and communicate those values in a way that is relevant and credible. It will also be necessary to involve managers and employees in a process of engagement, executing communication consistently across all touchpoints and creating metrics to galvanize management, manage performance, and monitor progress. The point is to use all the tools at your disposal, including new digital tools, to make meaningful connections with consumers that can be nurtured over time.