By: Joe Gillen
Customer satisfaction research demonstrates that trust is a significant, yet often overlooked, component that drives banking relationships and impacts consumer decisions about choosing a financial institution. Over the years, particularly those that immediately followed the 2008 economic collapse, trust for banks waned and individuals began moving away from institutions at greater rates. The number of underbanked individuals increased, which ultimately has led to a greater number of financially vulnerable Americans.
The ongoing JPMorgan Chase scandal is representative of one of the most impactful scenarios that lead to breaches of consumer trust, and the high frequency of lawsuits, trading losses, mortgage scandals and other improprieties has led to a significant decline of confidence in the financial system. The recent turmoil surrounding JPMorgan Chase revolves around the ruling by the U.S. Senate subcommittee that the bank misled regulators and investors about a $6.2 billion trading loss last year. The subcommittee's chairman, Democratic Senator Carl Levin, said the panel found "many, many failures" at the nation's largest bank, calling some of them "egregious," according to USA Today.
While this may seem like a "big banking" problem, a lack of trust in the financial system may make consumers skeptical of all banks, regardless of size. This means that community banks and credit unions must work even harder to separate themselves from large Wall Street institutions.
Highlighting community-based programs and benefits may help sway individuals
Community bank and credit union programs are unique in that they are smaller, more lucrative and cater more to the individual's needs. It's important that local institutions continue to highlight this message as they seek out new customers and members. For example, many consumers saw the death of rewards checking and cash-back programs at larger banks, and may not be aware that they still exist at smaller community institutions. As Americans adopt a more frugal mindset and seek out value among financial products, educating them on these benefits may improve customer acquisition.
In addition, one of the primary reasons consumers leave large banks is to escape rising fees. Local institutions typically offer the most consistent fee structures, most of which are lower than those offered by Wall Street institutions. This is another area in which banks and credit unions can appeal more to customers of all incomes and demographics.