The wide-ranging scandals plaguing financial institutions, spanning interest rate fixing to accusations of money laundering led to 2012 being another year of public distrust in financial institutions. In fact, for the third consecutive year, banks and financial services were the least trusted industries in the global Edelman Trust Barometer, which measured sentiment of trust by more than 31,000 people in 26 countries.
The automotive industry was in similar straits not so long ago. Back in 2009, our survey found car companies and banks to be equally distrusted in the U.S. Just four years later, the auto industry has rebounded after the financial crisis, and as a result, the automotive industry is more trusted than banks by 22 percentage points in the U.S., and more trusted globally too.
So what’s the reason for this leap in trust? For one thing, the automotive industry, particularly in the U.S., has done what many banks have yet to do: repay their government loans. But perhaps more fundamentally, it would seem that auto makers have returned to their core purpose: delivering products that serve their customers. At the Detroit Auto Show, the media reported on how auto makers are innovating new ways to make vehicles more fuel efficient in response to customers’ concerns over higher fuel prices. Compare this to recent reports on financial institutions, which include declining mortgage lending and rescheduling bonus payments in order to save on taxes.
Our trust data bears this out. In an examination of how banks rate against certain metrics, informed publics in the UK and the U.S. in particular gave banks low marks for doing what they’re in business to do, such as providing home mortgages and lending to small businesses.
The Economist’s U.S. Business Editor Matthew Bishop recently lectured that now is the time for financials institutions to become “socially useful.” In the lecture, he recounted the Tomorrow Company’s inquiry in investment in 2004, of which he was a part, aptly titled “Restoring Trust.” He quotes the report’s founder, Sir Richard Sykes who said, “What is needed is a change in the culture of the financial system that genuinely puts the customer first and takes a longer-term view, so that the whole chain creates value for the end-customer.” [Read the Report]
A culture change is by no means an easy feat. But if financial institutions can take the actions that demonstrate they are in the sole business of serving their customers, they will begin the road back to public trust, which can only benefit their businesses and the economy in the long run.
Matthew Harrington is the global chief operating officer.
Image by Supermac1961.