A broad wave of consumer distrust buffeted the banking industry's reputation over the past year, bringing an end to a run of positive change in public perception in the years after the financial crisis, according to the annual American Banker/Reputation Institute Survey of Bank Reputations.
"There has been a global erosion of trust around corporations, not even specific to banking, but corporations in general," said Bradley Hecht, a senior managing director with the Reputation Institute. "The trust level of banks has continued to drop relative to what it was before, to the point that less than half of customers and just a quarter of noncustomers give banks the benefit of the doubt in a crisis situation."
But while the decline in bank reputation can be traced to several factors, some of them well outside the industry's control, new data gathered in this year's survey points to a powerful — and perhaps surprising — antidote to much of the negativity focused on the industry: bank CEOs.
Based on an analysis of the survey data, the reputation scores of banks were six points higher among customers who were familiar with the CEO, compared with customers who were unfamiliar with the CEO. That is enough of a lift to move some banks from the "strong" to the "excellent" category on the 100-point scale.
The impact is even greater among noncustomers, with CEO familiarity accounting for a 7.7-point increase in reputation score.
The problem is that CEOs are largely invisible to most consumers. Only 17% of people surveyed were familiar with the CEO of their own bank, and only 7% said they recognized the name of the CEO of a bank where they don't do business.
To Hecht, the message in these findings is obvious.
"No longer can the CEO hide behind the curtain," he said. "No longer should they only talk about financial performance and product."
The survey found that in an era of increasing consumer distrust of corporations in general, worsened in the banking industry by scandals at major players like Wells Fargo, it is more important than ever for banks to demonstrate a sense of social responsibility and care for their customers. And bank CEOs are the single best voices to deliver that message.
"We know that the opportunity is for the CEO to link things like financial performance and product to societal impact and innovation," Hecht said. "Among CEOs who are most successful at doing that, their banks are more reputable, their customers like them more and their noncustomers are more likely to go to them versus other companies."
Banks especially need to show good corporate citizenship given that they are making large profits — something not lost on customers — even as their reputation has declined.
"What we're finding is that the more profitable banks become, the higher the expectation and the responsibility on behalf of banks to take that profitability and use it to reinvest in areas of society where they can have a positive impact," Hecht said.
This year, for the first time ever, perceptions of a bank's good citizenship became one of the top three drivers of overall reputation among both customers and noncustomers. That, combined with other new findings about what events really damage banks' reputations, has major implications for how bankers need to think about their public image.
Traditionally, bankers have assumed that their reputation rests chiefly on their ability to protect customers' funds and to provide access to them when needed, Hecht said. However, when the Reputation Institute asked survey participants to rate the impact that a variety of risk factors had on their perception of banks, things like data breaches and system failures that temporarily restrict access to funds were far less important than other issues.
Four of the top five risk factors for reputational damage have to do not with a bank's interactions with its customers, but with its treatment of its own employees. Respondents cited a failure to pay female employees at the same rate as their male counterparts as the top driver of reputational damage, delivering a nearly 20-point decline in a bank's overall reputation score. Also in the top five were unequal opportunities for employees by either race or gender, fining or punishing an employee who blew the whistle on internal wrongdoing, and inappropriate behavior by management, including sexual harassment.
"When a bank is in control of a relationship and they violate that trust — whether it be mistreating employees, not paying women as much as men, discriminating by race, firing whistleblowers — those sort of things have the most significant impact on reputational support," Hecht said. "They care more about how you treat people than whether there is a data breach, because frankly, there's a breach every day and people tune it out for the most part."
Banks' overall reputation score with customers fell by 3 points this year, to 76.6, which is considered "strong." Among noncustomers, banks' reputation also fell 3 points, to 62.5, leaving them at the low end of the "average" range, in which reputation, while not harmful, is of little use attracting new customers.
Large banks as a group for the first time in recent memory began to narrow the gap in reputation with regional and nontraditional banks, mainly because they held steady as the others tumbled.
While both regional banks and nontraditional banks still enjoyed higher average ratings among customers, 79.8 and 77.3 respectively, compared with big banks' 69.3, the difference between those scores is shrinking.
USAA Bank earned the top marks in reputation among both customers (87.0) and noncustomers (73.8). The San Antonio-based bank has typically been at or near the top of both rankings in recent years.
Read more about the Survey of Bank Reputations:
- Frost's formula for success: People before profits
- How to save a bank's reputation
- 2017 reputation survey: Banks avoid the Wells Fargo drag
That consistency is something the bank takes seriously, said its president, Chad Borton, citing USAA's focus on meeting the unique needs of its customer base, which consists of current and retired military personnel and their families.
"When we do that, we believe the outcome of reputation will also be consistent," Borton said. "Building and maintaining trust with our members over the long term is central to everything we do. It's embedded into our model; it's embedded into our operating rhythms."
In keeping with an increased expectation that banks demonstrate corporate responsibility, Borton noted that last year USAA committed to spending over 50% of the money it invests in philanthropy to supporting the families of military personnel facing challenges related to deployments and other stresses inherent in military life.
More recently, he added, the bank committed to donating 1% of its pretax profit to its corporate responsibility programs.
Among noncustomers, USAA and Cullen/Frost Bankers were the only two to receive "strong" scores (above 70). Rounding out the top five were First Tennessee, Synovus and Webster, which were in the "average" category with scores in the 60s.
Though many banks saw their scores fall, Synovus' drop of 9.4 points with noncustomers was the highest. Hecht said that could be in part because of a campaign to consolidate all of its banks, which had been operating under their original local names, into the Synovus brand.
"I imagine there is a little pushback around the changing of community bank brands," he said.
When customers assessed their own banks, their ratings were more generous, even though the overwhelming majority of banks considered in the survey saw their reputation with their own customers suffer. Besides USAA, five other banks achieved an "excellent" score (above 80) in the customer ranking: BMO Harris, Regions, Huntington, BOK Financial and PNC.
Regions was one of the handful of banks whose reputation among customers increased over the past year, something that Keith Herron, a senior executive vice president and head of corporate responsibility and community engagement at the bank, said was an explicit goal of the "Regions 360" program. The idea, he said, is to take the focus off pushing bank products and recenter it on the customer experience, with an emphasis on building trust.
The program was put in place in 2012 as part of what Herron said was a long-term plan to overhaul the relationship between Regions bankers and their customers.
"Reputations are not built overnight; it's something that has to be a part of your strategy," he said.
Over time, he said, the Regions 360 program became the bank's go-to strategy, guiding bankers in their interactions with customers.
"What we observed in the industry was that a lot of banks were focused on products, and there needed to be more focus on our customers' needs — their long-term aspirations and goals — and our ability to understand those needs would allow us to bring the right solution to the customer, no matter where that solution may be within our bank," Herron said.
"We wanted to take a holistic view of that customer relationship and as such, we've built deeper relationships with our customers and we have more trust with our customers as a result of the transparency."
Herron said that Regions is aware of the challenges facing the industry — particularly concerns among the general public about banks' behavior toward customers and employees — and that it tailors its business practices to maximize transparency and to give customers the sense that transactions benefit parties on both sides.
"The way we found a competitive advantage over our peers was through our operating model of Regions 360, which is 'one bank, one team, one Region.'" He said bankers work to develop a "comprehensive view" of each individual customer's needs "and then really work together as one bank to deliver the right solution."