An advertisement can tell you a lot about a bank — sometimes more than it means to.
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The study, published by the National Bureau of Economic Research, combed through 51,349 TV bank ads that aired from 2004 to 2020. Using AI programs to analyze data from Nielsen Ad Intel, the researchers evaluated these commercials in the context of three themes: pricing advantages, service quality and appeals to emotion.
Then that data was matched with a trove of information on the banks, drawing from U.S. call reports, deposit data from the Federal Deposit Insurance Corp., mortgage data disclosed under the Home Mortgage Disclosure Act, and small business loan data disclosed under the Community Reinvestment Act.
By comparing these two large data sets, researchers were able to assess how accurately banks advertised their strengths. Overall, they found, banks usually used their ads to highlight real advantages they held over competitors. But when such advantages didn't exist, an ad would simply tell a heartwarming story.
"If a bank does provide higher interest rates in a certain area, they do highlight that. And if a bank does provide good service at their local branch, they do highlight that," said Xugan Chen, one of the study's authors and a Ph.D. student in financial economics at Yale. "If they don't have any of those advantages, then [they use] trust and emotion."
This last category made up more than half the ads in the study. According to Chen and his co-authors, 53% of the commercials focused on "building trust and emotional connections," while 29% focused on customer service, and 18% focused on pricing advantages.
For example, a 2020 JPMorganChase ad, featuring a young man using the bank's mobile app, was found to focus 100% on service.
A Spirit of Texas Bank ad from 2020, showing a business owner gratefully thanking the bank for a COVID-era loan, was found to concentrate 20% on service and 80% on "emotional appeal."
And a 2006 PNC Financial Services Group ad, depicting a couple in front of their new house, shouting "Woo-hoo!" and "I love you!" was found to focus 100% on emotional appeal. (PNC declined to comment on this story.)
Uplifting images, the study found, can be a warning sign to customers.
"Banks lacking pricing or service advantages lean on emotional appeals," wrote Chen and his co-authors, Allen Hu of the University of British Columbia and Song Ma of Yale.
In general, emotion is an important tool in advertising. Facts about products and services can be persuasive, experts say, but without being paired with feelings, they can fail to make a lasting impression.
"Purely informational advertising can be difficult for people to connect with," Dan Gartlan, president of the marketing agency Stevens & Tate,
Like other businesses, banks rely on emotions in advertising to make their brands memorable. What the TV commercial study found was that when a bank ad depends exclusively on feelings, not facts, the lender may lack a comparative advantage in prices or service.
Appeals to trust, in particular, stood out as something to watch out for. When an ad leaned very heavily on this feeling, the research found, it could be a sign that the bank had few advantages over its peers — or, in a few extreme cases, was suffering from what the study called "reputational and systemic shocks."
To illustrate this point, the researchers cited a high-profile example. Following its
"We know the value of trust. We were built on it," the narrator of one
That ad was part of a major print, digital and broadcast
In the TV spot, historical reenactments and black-and-white footage highlight Wells Fargo's long history, including its role in financing the California Gold Rush. Referring to that time, the narrator says, Wells Fargo "always found the way … until we lost it."
"But that isn't where the story ends. It's where it starts again," he continues. "With a complete recommitment to you. Fixing what went wrong. Making things right."
Similarly, during the 2007-2008 financial crisis, many banks with exposure to Lehman Brothers, which was collapsing at the time, "reoriented their advertising" toward trust, the authors wrote.
"Banks … utilize the trust and emotion theme more in their advertising to counteract the rising distrust in the banking system, both during and after the financial crisis," the scholars wrote. "This may help these banks mitigate the possibility of bank runs."
When the primary emphasis was not on emotion, ads were more likely to stick to the facts. Whether the focus was on service or prices, this was usually a strong selling point of the bank being promoted.
"These advertising videos are just like a mirror of the bank themselves," Hu said. "The bank wants to highlight this precisely because the bank is doing that, and the bank is good at doing that."
Even when an element of emotion was included, this did not necessarily negate the accuracy of the advantage being advertised. The red flag was when an ad overwhelmingly focused on emotion, to the exclusion of factual details.
Business circumstances also played a role in determining the commercials' content. When a bank was attempting to enter a new market, its ads heavily emphasized pricing advantages, in order to lure customers away from more established lenders. Conversely, banks with a higher market share tended to concentrate less on pricing and more on service — sweetened by a bit of emotion.
"If they have already captured a large market share, they now want to charge a high markup," Hu said. "'Now, I may charge a little bit more money, but remember that we're your friend. You trusted us, so you can stick with us.'"
The "puzzle" of that loyalty, Hu said, was a major reason for conducting the study. Why do customers choose a bank for any reason other than the rates it offers on loans and deposits? The answer, he said, is an intangible thing that industry experts call "customer capital" or "franchise value." Analyzing bank ads may help to understand it.
"I think we used these advertising videos to open this black box," Hu said. "What is in this customer capital? We find we have pricing, we have service quality, and most importantly, we have emotion and trust."
