Comment by Neil Robinson on April 28, 2009 at 12:09pm

Stockholm Syndrome, perhaps, Michael?

When terrorists kidnap hostages, there's a weird condition that makes the captives protective of their captors, Stockholm Syndrome. Maybe those "trapped" into a poor bank - that is, any bank - is trying to protect it subconsciously. After all consumers are desperate to keep whatever remains of their rapidly dwindling funds, after all.

Maybe not such a mystery after all. Problem is, there's no SAS or Delta Force about to swoop in to rescue the consumer. Looks like they're on their own...

Comment by Eric Meyerson on April 28, 2009 at 12:49pm

Well, there is the FDIC. If it weren't for them, CitiBank and B of A would have collapsed by now, no?

Comment by Michael Bina on April 28, 2009 at 2:27pm

I'm going to pose that question to the 600 CEOs and Business Owners we have in our Think Tank. I'll bet the results will be several points stronger than the 58% & 72%...ANY takers out there?

Comment by Frank Rauscher on April 28, 2009 at 2:35pm

Eric is correct. The FDIC creates the trust. Look at what happened to WAMU when their big depositors realized that they were not covered- Billions left in a few days which forced the collapse.
Many Americans bank with their small local banks and credit unions which were not participants in the shameful actions of the top banks. While the top 100 banks have most of the money, the smaller banks may have a higher portion of individual consumers (the proverbial 70-80% that only have 20% of the money). That lack of trust is resulting in legislation to re-regulate the big offenders. The credit card holders bill of rights is an example of re-regulation caused by the shameful actions of the top 12 credit cartd issuers. Whether one likes President Obama or not, at least he had the leadership to call in those card issuers and tell them to clean house. How many went back to their banks and instead started the process to pay lobbyists to minimize the damage instead of standing tall and doing the right thing - being a good community citizen which then rewards the shareholders.

Comment by Dennis Santiago on April 28, 2009 at 5:16pm

The lack of confidence goes both ways. Or haven't you seen the latest round of envelopes with the new credit cards terms informing people there are now 4% transaction fees on things that used to be free. And that's on your accounts in good standing for 30 years even for people with enormous sums in deposits. Banks it seems are out to purge their books ... and make as much fee income from whoever remains to use their services. So would you trust a bank that doesn't trust you?

Comment by Tom Burke on April 29, 2009 at 3:05pm

Well put, Dennis. I was wondering whether to ask the group if this question of trust revolved around the given consumer's belief about his/her bank's solvency, or whether there was more to it. The latter seems to be the case.

Today I got a press release from Aite Group about a study they did on this matter; Excerpt:

Boston, MA, April 29, 2009 – A new report, issued jointly by Aite Group, LLC and Plenitudes Prospective & Management, evaluates consumer trust in banks and outlines the significance of trust from a marketing standpoint. Based on a February 2009 survey of 1,222 consumers in the United States, United Kingdom and France, the report identifies the role consumer trust plays in a bank's ability to win and develop business, and identifies the key drivers of bank trust.



It is no surprise that consumer trust in banks is low given the current economic condition and the global financial crisis in 2008. What makes this a cause for concern at banks is the degree to which a bank's ability to grow deposits is affected by consumer trust. Consumers that have a high degree of trust in their bank are twice as likely to open new accounts with their bank as consumers who only trust their bank somewhat. In fact, consumers who said they trust their bank "somewhat" were barely more likely to expand their relationships than consumers who didn't trust their banks at all.

"Banks have deceived themselves for a long time about the extent to which their customers trust them," says Ron Shevlin, senior analyst with Aite Group and co-author of this report. "Consumers may trust that the US$100 they deposit today will be there tomorrow, but that's just a tiny element of consumers' trust. Consumer perception of trust is shaped by the degree to which banks are easy to do business with, the extent to which they respond quickly to requests and inquiries, and banks' ability to make their rates and fees clear - all of which banks score poorly on."

Recent bank advertising designed to garner consumers' trust are unlikely to pay off, however. Of the many attributes that influence consumers' level of trust in their banks, rational attributes (like operational performance, and quality of advice in sales interactions) were considered more important than emotional attributes (like having a good reputation and living up to the values portrayed in ads).

According to Shevlin, "the key to rebuilding trust lies in improving key business processes like sales and customer onboarding, and by tracking actual referral behavior, rather than simply considering customers' intention to refer the bank."

Also, in a meeting with colleagues today, one of our consultants who's been working with on small business lending matters and alternate sources of financing for entrepreneurs stated flat out that "Banks are not interested in lending. They just want to make money on fee income." Take that for what it's worth. I for one suspect there's a good deal of truth to it. Good lending is hard work.

The company that holds my mortgage just tagged me for $20 for a "payoff report." I'm refinancing at a lower rate. Good riddance to them.

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