Trust has long been a precarious issue for the financial services sector, but never has it faced the crisis in consumer confidence it does now. This week, the Government confirmed an initial cash injection of £37bn into some of the UK’s biggest banking brands as part of a £400bn bail-out plan aimed at shoring up the markets. Immediately, analysts labelled it a “humiliating day” for the banks.
And, across the globe, central banks are unveiling their own rescue packages in a bid to halt a situation that has been declining daily. Collectively, they are pumping in the equivalent of £288 for every person on earth to keep the system afloat.
Over the past year, and triggered by the US subprime crisis, investors have lost their trust in banks, banks in their borrowers and mortgage companies in their home buyers. Around the world, lines of credit have been pulled or frozen.
And now, with the forced nationalisation of major brands, along with the collapse of the Icelandic banking system when 300,000 UK savers faced – until the Government stepped in – the real possibility of losing their savings, customers are losing their trust in banks.
Although Financial Services Authority chairman Lord Turner is right in asserting that no UK customer has yet lost a penny, the realisation of the precariousness of a system Joe Public thought indestructible, has dawned. Trust in banks, it seems, has plummeted almost as low as their share prices.
Mintel research shows Lloyds TSB to be the most trusted of the big banks after it was hailed for its conservative approach, but even it is not immune. Lloyds TSB, combined with the HBOS group it is acquiring, will collect £17bn in Government funds – in exchange for 40% of its shares. RBS gets £20bn in the deal, losing an estimated 60% to the taxpayer. Both RBS and HBOS have lost their chief executives and chairmen, and executives will see their cash bonuses limited or forbidden. Yet, on Monday, shares in those banks continued to fall, with HBOS closing down 27.5%, Lloyds TSB dropping 14.5% and RBS down 8.4%.
The Mintel report was published last Friday, but already its author Toby Clark has warned it is almost “out of date” because of the speed of change.
According to the report, only 16% of people feel that they trust the typical, big, high street banks, down from 33% a year ago. The conservative, Government-backed institutions fared better, but have also suffered a loss of faith. National Savings & Investments Trust has slipped from 39% last year to 25% today, but it – and the nationalised Northern Rock – has had to pull products from the market, which were becoming too popular with savers looking for a safer home for their money. HSBC, which rejected Government help in favour of a self-funded capital influx, is believed to have benefited from savers no longer looking for the best rates, but instead, the most secure places to store their cash.
Clark predicts that old-fashioned, traditional values will make a return, both in management and marketing. He says: “A year ago, it was about whether you trusted the banks to give you a good rate. Now its about whether your bank is going to be here next week.”
Marketing is likely to assume an even greater importance in reassuring people. The immediate task for all banks is to keep advertising, simply to show people they are still there, before the arduous task of regaining customer trust begins.
Jim Prior of The Partners says: “We are seeing a lot of activity from banks and financial companies, and the message they are giving out is ‘business as usual’. They are running the same ads. That is the right thing to do if you are HSBC or a bank that has been relatively unaffected, but certainly not if you’re one of the banks that has come off badly.”
One banking executive says: “A lot of financial brands will take a good, hard look at themselves and reassess the aspects and qualities that make up their brands. They will have to move away from that razzle dazzle.”
He says the supermarket-style, “pile-’em-high” commoditisation of financial products, favoured by HBOS chief executive Andy Hornby (now departing), will disappear. Bradford & Bingley alienated an already distrustful public when it launched a campaign days before its emergency rescue, touting the institution as a “safe place” for their savings. It continued to run the campaign even as its mortgage book nationalised and savings were sold to Santander-owned Abbey. Following a flood of complaints to the Advertising Standards Authority, the campaign continued, but was adapted to bear Santander credentials and flaunt the security of the Spanish bank.
Meanwhile, Halifax, HBOS’s flagship brand, continues pushing its existing savings ad, showing brand icon Howard Brown surfing, which critics have said is at odds with the current climate.
Prior says: “It seems that the banks with the dumbest ads are almost the same as those with the dumbest of business strategies. If you believe it’s okay to run the same ad as you were before, despite everyone knowing the world has changed, then that will reflect badly on your reputation.”
Clark adds that Halifax’s “staff as stars” campaign “looks like a relic from another age”.
Yet the problem is not universal. Barclays has joined HSBC in adhering to a strategy of self-help. And the insurance companies, among them Axa, Aviva and Standard Life, are not only reassuring the markets that they are protected, but are planning major marketing activity.
Some have suggested a crisis for such companies is “around the corner”, but others say their far smaller exposure to the money markets mean that although there will be losses, they will be far less bloody than those of the banks.
Last week, Aviva had to move to calm fears over its solvency position by stating that it could withstand a further 40% drop in the equity market. Analysts say that regulators could afford to take a more pragmatic attitude towards life companies, which have long-term liability, than towards banks. Axa last week launched a high-profile brand campaign urging customers to press for change under the strapline “redefining standards”, and believes it must do more to improve customer confidence – and live up to that manifesto (MW last week).
Axa group marketing director Olivier Mariée says: “In this new campaign we’re saying that we want to review the way we are doing business and we are offering solutions. It is very different.”
He admits the strategy is risky, but the right one for the brand. “There was a very strong commitment from the group and the UK team to tackle this ‘mistrust’. We want to act and do something,” he has told Marketing Week.
The assurance and insurance brands will undoubtedly be trying to play up the trust factor, and have been insulated to a certain degree. They are also seeking an opportunity for growth as a wary public looks to insure its assets.
“When people are in turmoil, anxiety is a big driver,” adds Mariée. “Insurance is about managing anxiety and risk. This is the time when people need to protect themselves. They also want to deal with an institution that they know they can trust. This is the kind of situation that will be difficult for the challenger brands.” In today’s tumultuous times, it is also the kind of situation that will be difficult for a slew of once-trusted institutions who must now build confidence in an industry battered by doubt.