There is significant variation in the level of trust the general public have towards financial services organisations. Notable differences exist between building societies, banks, insurers, investment firms and payment firms.
The nature and focus for many financial services organisations means the potential benefits of using them is not immediately obvious. Additionally, the level of differentiation between brands is significantly less than in other industries. This results in consumers feeling that they lose the element of choice which they value in other walks of life.
Newer, more innovative challenger banks and FinTechs offer this differentiation, however, they are yet to gain the scale to compete with the incumbents. In parallel large tech firms such as Amazon and Google have the potential to hugely disrupt the industry. Fundamental to their growth and scale compared to the traditional organisations is the levels of trust which they hold with consumers.
Negative perceptions of financial services providers are significantly more common among consumers with little or no experience of them. For example, those who don’t have investments are significantly less likely to trust investment firms than those who do.
Brands therefore need to improve the way they are viewed by non-customers to boost their perceived trustworthiness and remove this as a barrier to attracting new customers.
For example, over a decade on from the financial crisis many consumers are still highly sceptical towards banks’ motives. *Just 36% of British consumers trust banks to work in their customers' best interests, while more than half (55%) don’t. This is around the same proportions as in Germany (35% versus 57%). Yet in Italy (30%/64%), France (29%/62%) and Japan (27%/65%), the scepticism is higher still.
The changing UK financial services market
While Britons are better disposed towards financial institutions than many other European consumers, the levels of mistrust in this country are still high in comparison to much of the rest of the world. And although most people believe banks are competent and know what they are doing, large swathes of the public – especially in European nations – are still cynical about their motives.
As financial services organisations respond to changes in the market including the digitisation of customer journeys, it is important that organisations strike a balance between deploying cutting edge digital products and services with the resilience needs of these services. Only then can trust be established, maintained and enhanced.
What drivers are supporting digital consumption?
Operational Resilience. A regulatory perspective.
“Operational disruption can impact financial stability, threaten the viability of individual firms, or cause harm to consumers and other market participants in the financial system. Firms need to consider all of these risks when assessing the appropriate levels of resilience within their respective businesses. Dealing with cyber risk is one important element of operational resilience however broader approach, which addresses how the continuity of the services that firms provide might be maintained regardless of the cause of disruption.
A resilient financial system is one that can absorb shocks rather than contribute to them. The financial sector needs an approach to operational risk management that includes preventative measures and the capabilities – in terms of people, processes and organisational culture – to adapt and recover when things go wrong.
As recent high-profile disruptive events have shown, the speed and effectiveness of communications with the people most affected, including customers, is an important part of any firm’s overall response to an operational disruption.”
Supporting resilience - examples of good practice
No organisation can be fully resilient and secure. Control frameworks do however provide a method / frame of reference by which a company can assess and monitor its effectiveness. As noted previously, a positive company culture is key to establishing and embedding such frameworks – a number of which have been outlined below. It is important that organisations consider their business objectives, targeted outcomes, risks inherent in their business processes before adopting applicable control frameworks. As businesses move to adopt digitised processes, it is important that the implementation of such frameworks needs to be adapted to remain fit for purpose.
Establishing a resilient organisation - challenges we have observed
Ownership and accountability:
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Tone at the top often set however clear accountability and ownership not understood at an operational level.
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Reliance placed on a small number of key team members ("heroic" efforts).
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Scale of change within financial services firms leaves resources stretched and unclear on accountability.
Scalability of enterprise risk frameworks:
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Enterprise risk management frameworks based on historic ways of working, e.g. pre Cloud, digital services, use of third parties - therefore become impractical and unscalable.
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risk and control language / taxonomy not reflective of how 1st line teams operate - adoption becomes difficult. 2nd / 3rd line teams not focused on driving the right behaviours / outcomes.
Culture (incl. language):
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Operational risk and resilience not ingrained into the culture of the organisation.
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Language used hinders adoption e.g. focus on risk rather than enablement and taking advantage of business opportunities.
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Operational risk seen as a blocker.
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Communication channels immature or often unproven.
Establishing, embedding and optimising business processes:
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Initiatives established to improve ways of working and controls but rarely deliver and embed required outcomes.
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Business processes not considered holistically / e2e across an organisation. Accountabilities unclear preventing optimisation of processes.
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Symptoms often addressed however root cause of issues rarely identified.
Strategic alignment:
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Organisational priorities understood however its often hard to translate, measure and monitor these operationally / tactically due to org complexity and inertia.
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Friction across the organisation on effectiveness of risk and control capabilities, e.g. 3 lines of defence model.
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Reporting often not transparent.
Supporting resilience - some practical steps
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Define clear accountability, roles and responsibilities throughout various layers of the organisation. Focus on developing culture and the language used to describe the role and benefits of operational resilience.
Identify business services / processes which your organisation is accountable for. Define impact tolerances for key business services e.g. level of disruption which is deemed to be acceptable to the Board, the company and interested parties e.g. customers and suppliers.
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Articulate impact tolerances for business services based on defined metrics and specific outcomes, setting a target for how they expect to recover from a severe but plausible disruption.
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Prioritise the business processes using a risk based approach to determine criticality.
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Focus on prevention, detection and response to operational incidents. Establish, embed and optimise business processes and supporting controls.
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Prioritise communications during disruptions, particularly those affecting the customer-oriented services provided.
*YouGov Statistics 2018
If you’d like to learn more about how we can support you in all aspects of Operational Resilience, please get in touch.
