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Maria Abbe, Content Manager at PrecisionLender, sits down with Katharine Briggs, EVP of Client Success, to discuss why the financial services industry is the least trusted industry, according to the most recent Edelman Trust Barometer. They dive into possible reasons why this may be and how banks can earn back the title of trust they rightly deserve.
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Maria Abbe: Hi and welcome to the Purposeful Banker, the podcast brought to you by PrecisionLender, where we discuss the big topics on the minds of today's best bankers. I'm your host today, Maria Abbe, content manager here at PrecisionLender, and I'm joined today by our EVP of client success, Katharine Briggs.
Welcome back, Katharine.
Katharine B.: Thanks. Glad to be here.
Maria Abbe: Katharine works tirelessly with our clients to make sure that they are set up for success within PrecisionLender's platform because, when they are, they're able to provide a better customer experience, and that better customer experience creates strong levels of trust between our clients and their borrowers, so it was a bit of a shock when we read the latest report from the Edelman Trust Barometer, which was highlighted in Chris Skinner's article entitled Half of Banks' Customers Don't Trust Them.
The conclusion from that report was that financial services is the least trusted sector and the technology firms are the most trusted, so that's hard to reconcile that an industry built on holding our hard-earned money could exist with trust ratings in the cellar.
Katharine B.: That is wild. I totally agree with you, Maria, and I want to study this if we have some time. Let's study it from a few different angles, and maybe we even start super basic. The entire article is predicated on this idea of trust, and so maybe we should just start there. What is trust? What is trust among humans?
I'm in the middle of reading a very long, but fascinating book. It was actually published a few years back, so maybe some of the listeners have already read it, but it's called Sapiens by Yuval Noah Harari, and the book details how humans came to be on top of our food chain and what is unique about the human species.
Let me tie it back to the topic we're talking about, so what is trust and are humans the only species on our planet who can trust? The short answer I think, although I'm not all the way through the book, the short answer is yes, and we're the only species that can trust and certainly to the scale that humans have developed trust with each other knows no parallel. The truly unique trait of humans is our ability to create and believe and then share and communicate fiction. Harari calls this fiction, and he doesn't mean something that isn't true. Rather, he's referring to entire kinds of entities that we have never seen, heard or smelled. It's something that humans can collectively imagine.
For example, when you bring this home, for example, the popular desire among humans to take a vacation. That is something that we can all imagine together. There is nothing natural or obvious about taking a vacation. We are not instinctively born wanting to take a vacation, and Harari tells the reader a story about a chimp. A chimpanzee would never think to go on a "vacation" into the territory of a neighboring chimpanzee, but, today, humans spend enormous amounts of money to go on vacation and experience the world, again, something we're not born with. It is rather a shared fiction or myth, a collective belief.
An interesting story about chimpanzee and vacations, but I still haven't gotten to what is trust. All other animals use their communication systems to describe reality. Humans are able to use communication to create new realities such as the vacation. Of course, not all fictions are shared by all humans universally, but there is one that actually has become universal in our world, and that is money. All humans trust in the value of money because we accept this shared myth or fiction.
If we didn't think about it this way, Maria, we would literally have to trade for every single thing we would ever want, yeah, or, worse, we'd have to go back to our hunter-gatherer days, so the ability to trust is absolutely required for us to believe in this common myth of money and what it represents.
Maria Abbe: That's really interesting, and yet banks are the least trusted sector, I guess you could call it.
Katharine B.: Right. This one shared myth of money is somehow associated with one of the least trusted institutions.
Maria Abbe: I'm sure there are a few reasons for that. I have a couple of guesses. Maybe we can dive into those a little bit more. Not to harp on the financial crisis, but it was a painstaking moment in our economy, do you think that we're still on wobbly legs as we try to pick ourselves back up and place trust in those institutions?
Katharine B.: Great question. In my opinion, in some ways, I think the real estate industry actually took a bigger hit in confidence or a bigger hit in trust here. The mistaken belief that real estate value always goes up and that real estate is a terrific investment in the US, that actually I think took a bigger hit than the banks and, if we think about it really, the bank failures and the bailouts were largely isolated with a very few of the largest money center banks.
At the core of it, banks are foundational to modern economic life. They marry man's desire for monetary gain into public good by relying on keeping promises, so, just by the institution of a bank as an optimistic institution, they create a more united and hopeful society. It's the whole George Bailey effect from It's a Wonderful Life and so, I don't have the Edelman survey results from 2005, for example, that would have been prior to the financial crisis, we might find if we went back and found them that banks' trustworthiness was just as low then, so I'm not sure that while the financial crisis was certainly a horrific period and shaped our psyche and made amazing impact on the regulatory environment, I think we might find that trustworthiness would have been just as low with banks a decade or two decades ago.
Maria Abbe: Okay. Interesting. I wonder then if it was a matter of trusting people versus an imagined, like you said, unnatural entity, that is a bank, so, if the researchers had asked instead, "Do you trust your banker?" would the results have been any different?
Katharine B.: I'd have to think it would have been. It maybe a little bit like we all have a strong disdain for Congress, but we all love our personal congressmen, the one in our district, so, yeah, I think you're right. I think the banker would have gotten much higher scores than the bank entity.
Maria Abbe: Right. Exactly. It's like equating doctors and the healthcare system. We love our doctors for the most part.
Katharine B.: Right.
Maria Abbe: The healthcare system, maybe not so much. Another point that I was thinking through could have been generational differences, and so I'm a millennials. I'll speak to millennials. I trust my bank. I've always had a great banking experience especially now that I can check all my balances quickly and easily right at my fingertips on my phone, but we are a different generation, and we're using our money differently.
There was a survey from the UBS Investor Watch that says the majority of millennials' money is in cash, so we're doing a whole lot of saving and not a lot of investing, and I wonder why that is. I am no financial guru, so take this guess with a grain of salt, but I wonder if there is more risk in investing our money. We are walking into all of this with a lot student debt, so we want to keep our money close to our chest and not invest it as much, but then again there are reports out there that say that millennials value different things, so we place a lot of value in building relationships and having experiences, and maybe we [inaudible 00:09:27] come to the vacation ...
Katharine B.: That vacation-
Maria Abbe: ... the vacation myth.
Katharine B.: Yeah, that vacation fiction. Right.
Maria Abbe: Yeah. Exactly, but we build our trust through relationships and in transparency, and we want our banks to do the same.
Katharine B.: I think the very interesting, thanks for sharing your perspective on millennials, and I agree with you actually, that I think that building trust through relationships and in transparency is probably that's true across all the generations.
Maria Abbe: Then how would a person or a company build trust? I've read that researchers have found that trustworthiness requires three different things, ability, integrity, and benevolence, so maybe we can assess a bank's and a banker's score on those three measure.
Katharine B.: Let's try. For a bank, they would need to assess, one, does the bank know what they're doing? Second, are they honest and, third, does the bank actually care about their customers?
Maria Abbe: Okay. To your first point, we see banks competency on a daily basis because we work with banks day in and day out. I wonder if that might not be what the customer sees, so going back to the trust and transparency thing, even though there are regulators, there are shareholders and there are accounting firms to confirm their competency, I think that, bringing this to your second point, honesty, we have to ask the question, "How can banks confirm their competency and be honest?"
Katharine B.: Yeah, and I think this is a good spot for a quick distinction here. You're right, banks certainly have all the ability, and I believe also that banks are truthful, but they're not always transparent. Honesty requires telling the truth and also telling the customer what they need to know.
For example, loans can be stuck in underwriting for a really, really long time, and the customer is not actively being lied to, of course, they're not, but a borrower might feel, they might feel like they're being jerked around, and maybe the bank or banker doesn't have a system that allows that banker to easily see the real time status of that customer's loan, so let's give the banks credit for honesty here, but maybe they're not always as transparent as they could be. They may not have the tools they need to be as transparent as they could be, but let's give them certainly credit for being honest.
Maria Abbe: Now, to the third point, do banks care? That would have to be a piece of the puzzle as well and, back to your collective myth discussion, you could argue that, no, the corporate legal entity does not care because it's incapable of feelings, but the bankers should, and they likely do care. They should care about the communities in which they live and work and send their kids to school, so, if the question had been, "How trustworthy is your relationship manager?" I mean, I think the results may have come back a little bit, maybe even a lot higher, so, to this last point, "Do banks care? Do customers feel benevolence?" is this where the banks are really losing the battle?
Katharine B.: Yeah, I think they are, Maria. I think this is where, that last mile, this is that disconnect. We know they have the ability. We know that they are honest. It's that sense of benevolence, that ability to show that they care is where maybe it's falling down, and it requires I think, ultimately, for the relationship manager or the banker to connect with their customer on a personal level. The move that a lot of banks have made toward digital banking, oftentimes, that removes those opportunities for personal interactions, and the personal interactions is really where that trust is built.
It's easy to be cynical about trust and banks, but humans don't dominate this planet by turning on each other. Rather, this shared fiction allows us to trust each other, and it's possible that the more technology that banks have added by displacing tellers and the local branch bank officers that maybe, that technology without the human touch, is what's actually causing some of these issue.
That might sound odd to hear that from folks here at PrecisionLender, a SaaS company with a well-known and respected tool that delights our relationship managers through the use of Andi, and for any of our listeners that don't know who Andi is, she is the relationship manager's 24 hours a day, seven days a week analyst. She's using artificial intelligence and machine learning to support RMs, but this is an important distinction. She is supporting the RMs. She's not replacing the human. Rather, she's augmenting that human. She's performing the math and lots of other amazing things, but she's allowing the human to be even more human and focus on building those relationships with customers.
Maria Abbe: Yeah, that's a great point. You need the personal connection and, I mean, at this point, banks have to marry the personal connection with the technology, and Andi is an example of how you can do that in a way that's effective. I mean it also comes down to customer experience. What a poor customer experience when you have a problem and you call in whatever method that the institution has set up. You call in. You're pressing all these numbers. You're talking to someone who isn't real, so the question comes down to, "How can banks use technology?"
Going back to the original point that technology firms are actually the most trusted based on the Edelman Report, "How can they use that technology in a way that provides a more transparent customer experience?" and I think we're seeing a lot of that now in the industry with all of the financial technology that's coming out in order to aid banks in getting that job done.
Katharine B.: Yeah, I'm really optimistic here, and I think that, like I said, if we have the discussion we've had where we're parsing the bank versus the banker and not getting too pessimistic about the results from the bank and actually focusing on if the question had been asked differently and if we were arming those wonderful bankers' relationship managers with technology, we'd be at a different place on that trust score.
Maria Abbe: Great. We have covered a lot of ground, and I would say, I would argue that the conclusion is there isn't one reason why people aren't trusting their banks. There's probably a whole lot of factors, but one thing remains true. If banks are honest and transparent with their customers and do what they can to build strong relationships, we'll see a rise in those trust levels, so that will do it for us today.
If you want to listen to more podcasts or check out more of our content, you can visit our resources page at precisionlender.com or you can just head over to our homepage to learn more about the company behind this content.
Thank you, Katharine, for joining us today. It's always a pleasure having you on.
If you like what you've been hearing, make sure to subscribe to our feed in iTunes, SoundCloud, Google Play or Stitcher, and we would love to get ratings and feedback on any of those platforms. Until next time, this has been Maria Abbe with Katharine Briggs, and you've been listening to the Purposeful Banker.
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