The continuing scandals highlight the urgent need for big change in banking and for banks to work for customers, not bankers. Customer service should come before sales; standards and ethics must improve; and bankers must be held to account.
The relationship between banks and their customers is at crisis point. Our research shows that banking is one of the least trusted of all industries. Two-thirds of consumers say they don’t trust bankers, almost three-quarters of people don’t think the banks have learnt their lesson from the financial crisis and just one in 10 think bankers work in their best interests.
Not all banks and their employees are getting it wrong all the time. Every year Which? surveys find that some banks are consistently doing the right thing for their customers. Take First Direct, for example - our members say they continually get it right. However, this is far from the norm.
This paints a pretty damning picture of the state of banking, but it’s not too late for banks to clean up their acts.
In order to ensure sustainable change, there firstly needs to be effective competition and regulation.
More competition will force a cultural change in banking that will deliver better products and services for consumers. And banks should be making it as easy as possible for customers to switch bank account.
Regulation should focus on better outcomes for consumers, not on ticking boxes, but a more effective code of conduct is needed to improve standards. There must be an independent body, trusted by the public and with a statutory footing to administer this code, and bankers that break the rules must be held to account. The regulator must be more proactive.
To fully restore trust, banks must improve their relationships with both their customers and the public in general. They need to end the destructive remuneration practices that have encouraged mis-selling and stop rewarding those who presided over it.
I am sick of hearing tales of customers walking into their branch to pay into a savings account only to have someone try to sell them a totally different product. The Co-operative Bank and Barclays have recently launched customer-service-focussed incentive schemes, why can’t the rest do the same?
All of this won’t come about without a huge shift in the culture of banking. A shift that sees banks working for their customers, not for themselves. It’s a big task but if bankers realise this and embrace the new reality, they can once again be part of a profession that the best new graduates want to serve.
Consumers are asking for this change. 120,000 people have pledged their support for the Big Change campaign from Which? and 38 Degrees. Now it’s up to banks to deliver.
Peter recently spoke at Economist Conferences' European Retail Banking Summit. Further details about his speech at the event can be found here.
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of The Economist Intelligence Unit Limited (EIU) or any other member of The Economist Group. The Economist Group (including the EIU) cannot accept any responsibility or liability for reliance by any person on this article or any of the information, opinions or conclusions set out in the article.
