This post is part of Â鶹´«Ã½AV's ongoing series on the shifting landscape for financial institutions. It provides insights into channel optimization, emerging customer behaviors and preferences, product penetration and relationship growth, engaging the most critical affluent and business customers, and reshaping banks' overall value proposition.
Americans' confidence in banks as an institution is rebounding, but -- to put it generously. While there are many things banks can do -- and are doing -- to restore their own customers' confidence, by all accounts it looks like banks as a whole aren't making any meaningful headway in restoring the confidence of the general public. This begs the question -- almost seven years after the start of the financial crisis, why is it still cool to hate banks? I have some theories:
Smaller companies are "good" and larger companies are "bad."
Over the past several years, it appears politicians have changed the definition of what's deeply American to be "motherhood, apple pie and small-business owners." And the public has responded to it. From the same study that shows the public's lack of confidence in banks, we know that 67% of Americans have somewhat or a great deal of confidence in small businesses. Compare that with only 21% of Americans who have the same level of confidence in "big business." Banks are often portrayed as the epitome of big business and all its trappings -- specifically highly paid executives who are out for profit at all costs.
But that in and of itself is letting banks off too easy. Historically, banks have been able to achieve much . And while we know that customers of smaller banks and credit unions are with their bank than customers of the "big banks," the gulf is shrinking and there are many big banks that are making year-to-year progress. For those that aren't making progress with their retail customers, it's not because they can't, it's because they choose not to. Executives at these institutions may be focusing on the loftier parts of their business when it's the day-to-day experience of engaging their retail banking customers that will most likely have the greatest impact on restoring the public's confidence.
Good bankers aren't media sexy.
Name that television show where a banker helped a customer get a car loan even though the customer had a bad credit score (through no fault of their own -- another lender had messed up their credit report and it was taking years to fix). Or, how about that movie where the banker got a small-business owning customer into a line of credit with a lower interest rate than their current loan, and in the process told the customer how to better manage their cash flow so now they feel more successful? Maybe it was that touching YouTube video where the banker fixed a direct deposit issue for a military spouse whose husband was deployed overseas and about to run out of needed money thousands of miles away if it didn't clear that day. Remember those? Of course not, because the feel-good stories of local bankers aren't going to make money for any studio executive or attract viral status on the Internet. Nobody's paying $12 for a ticket or subscribing to Netflix to watch a movie about someone who did the right thing the first time. But these are some of the real-life examples of ways in which customers have told us that their bank -- even some of the "big banks"-- provided them with extraordinary, confidence-building experiences.
We are bombarded with images and portrayals of bankers, but these depictions are likely to be somewhat mysterious to the average person and exist in the world of institutional, private or investment banking. Think about The Wolf of Wall Street, Boiler Room, or that Law & Order episode where the investment bank was in with the mob and responsible for multiple murders. Or consider the endless media stories about Wall Street and executives' salaries and bonuses, The Daily Show segments -- that's what sticks in our heads. The truth is, there are lots of very good people who work in banking. They understand that money affects every aspect of their customers' lives and they work diligently to provide solutions that are fair to both their customers and their employers. And because of that, most . "Love my banker, hate banks," is most likely going to be the pervasive general attitude for a while. Or, at least until the economy recovers enough that people forget it was banks that caused it to crash in the first place, until these sexy "bad banker" stories that we are constantly subjected to can be thought of as just that -- stories.
It doesn't feel like those who were responsible paid the price.
Yes, there have been consequences for reckless behavior in the banking industry. I'm sure there are bank executives who would say there have been more than enough consequences including mergers, small bank failures, job and monetary losses, eroded brand equity and increased regulations that many executives believe are stifling their recovery. But only one person who the general public has never heard of from a company most people have no experience with . We saw no high-profile prosecutions, no 25-year jail sentences, no fines that were incredibly burdensome, no Bernie Madoff style perp walks. Lehman was bought by Barclay's, Merrill Lynch lives on at Bank of America just as Wachovia was absorbed by Wells Fargo.
To the public, it all seems very business-as-usual for the banks. But the average American still knows the neighbor who lost their job and is financially unstable after a long period of unemployment, still drives past foreclosed or unfinished homes, still has to keep up payments on their HomeBanc originated mortgage, still worries about the value of their own home because it is just now this close to no longer being underwater. The average American still talks to their brother who lost his job and was lucky enough to find a new one quickly -- but is making 30% less money than he used to, so his wife took a part-time retail job to help make up the difference. The consequences are real to us, we feel we have more than paid the price, but it's very hard for the general public to figure out how bankers have paid their dues.
I'm sure there are those who would be wholly satisfied by some form of punishment for the purpose of pure vengeance, but I think the deeper underlying issue is that, as a society, we never got closure from this crisis the way we have in the past. Bernie Ebbers brought down a Fortune 500 company and will spend 25 years in jail for his hard work on that front, along with his brethren from Enron and Tyco. Anderson was shut down by the government (even if the Supreme Court later reversed the decision -- who remembers that?). If you recall the news cycle in the early aughts, we couldn't get enough of these stories, then they came to their natural conclusion and we moved on. We can't have confidence in something we can't trust, and we can't trust something that appears to take no responsibility for its actions. Bank stories aren't coming out as fast and furiously as they were in 2008 and 2009, but every time a new story does come out, we're reminded that we never had any closure, and it feels like the crisis is still going on. The larger issue still feels systemic rather than bank-specific, and it still feels like unfinished business.
Until the banking industry decides that it can -- or even wants to -- fix its public perception through better PR, improved government relations, or ideally both, individual banks will have to carry the weight. The only way for these banks to improve their status is to keep doing what works -- improving perceptions one customer, one financial life saving moment, one personal financial dream at a time.