It Was A Wonderful Life: How Banks Can Revive Their Reputations

There was indeed a time when banks were trusted, respected, and a part of the fabric of our communities. And there’s a way for banks to get it back.

It Was A Wonderful Life: How Banks Can Revive Their Reputations

Where have you gone, George Bailey?


Here in 2013, conjuring the ghosts of It’s a Wonderful Life likely strikes most in the financial services industry as the height of naivety. But I do it for two reasons. First, it reminds us that there was indeed a time when banks were trusted, respected, and a part of the fabric of our communities. As a child, I knew my father’s bankers. They were there to help. That was a time when they were seen as true enablers of the American Dream; and when a screenplay about consumers coming to a distressed banker’s aid wouldn’t be laughed out of Hollywood. The movie is a testament to what banks once were and what they can be again.

Second, it brings us to a second film, The Perfect Storm, which is what the banks find themselves in today. New sources of competition, lagging innovation, and new regulatory and reputational challenges are converging to bring about a sweeping sea change. Banks will either adapt, survive, and regain public trust, or be swept up by the tempest that is transforming the financial services industry faster than those within it realize.

Consider first that bank lending is down and non-bank lending is up as outsiders seek to fill the demand left by shuttered institutions–institutions that, importantly, are not coming back. Consider also that crowd-funding is poised take off when the U.S. Securities and Exchange Commission issues the long awaited rules that will govern the practice. At the same time, next generation banks are emerging in the form of companies such as Walmart, Facebook, and others that are leveraging technology to test the waters of consumer finance.

Second, there is the banking service experience, which is opening competitors’ window of opportunity. It maintains the relics of George Bailey’s day, but none of the charm. Imagine if walking into the Apple store was like walking into a bank. Rather than being greeted by a problem solver at the door, you would be asked to sign in and wait for the next available representative sitting behind three inches of bulletproof glass. Common questions and service requests would not be handled on-site. Instead, you would be directed to online and mobile banking venues that routinely force consumers to fend for themselves. If you were lucky enough to get answers, they would come with a fee. You would be seen not as a consumer, but as a revenue stream. In the end, Apple would be completely fungible with any other technology store.

Add the larger reputational issues that are compounding consumers’ anger and frustration, and the storm clouds really begin to churn. Libor settlements are raining down like manhole covers. The media is still conducting its financial crisis postmortems and wondering why the SEC and DOJ failed to claim any high-profile scalps. Embarrassing employee emails demonstrate a callousness and ruthlessness that not even guardian angel Clarence Odbody could reform. All of this is reinforcing the notion–correct or otherwise–that there is nary a financial transaction in which consumers aren’t left holding the bag.


Perhaps most troubling is the fact that the numbers support the divorce between consumers–once the industry’s evangelists–and their own banks. The banks’ Financial Trust Index remained stagnant at 28 percent for December 2012. In other words, three out of four Americans don’t trust their financial institutions. That’s a far cry from the days when public confidence sat at 75 percent–a figure that stood for more than three decades after Clarence got his wings. More specifically, Ernst & Young’s Global Consumer Banking Survey 2012 finds that the number of consumers planning to change banks grew 5 percent last year; that customers with only one bank (also known as brand loyalty) fell 10 percent last year; and that customers with three or more banks are up 11 percent from 2011. No wonder not a single bank showed up on a recent Harris Interactive survey asking consumers which U.S. companies maintain the strongest reputations.

If the problem can be boiled down to one overarching theme, it is that consumers, investors, regulators, and the media have forgotten what banks really are–the engines that enable us to open small businesses, own a home, buy a car, or send our kids to college. Because that narrative is absent from the conversation, instances of bad news and poor service operate in an informational vacuum that allows them to dominate marketplace perceptions.

That has to change before banks can get back to the reputational salad days of George Bailey’s Building and Loan. How can they do it?

1.Embrace the democratization of the marketplace.

Thirty years ago, banks could rest easy on the notion that if their institutional investors were happy, things were good. After all, there weren’t as many of us in the market. Today, however, 54 percent of Americans hold stock in one form or another. These relatively new investors can’t count on home appreciations for financial stability and a comfortable retirement. They are at the market’s mercy, and the market is at the mercy of the banks. That makes just about everyone with an IRA, 401K, or investment portfolio a bank constituent.


At the same time, everyday customers are beginning to flex their muscles in ways that make direct consumer outreach an absolute imperative. The same Ernst & Young study cited above found that 71 percent of banking customers seek advice on products and offerings from friends, family, or colleagues, not bankers or financial advisors. Of that group, 44 percent seek guidance via social media. That makes every customer not just a constituent, but a potential market influencer.

These points demonstrate that the banking industry can’t conduct the lion’s share of its public affairs in New York City skyscrapers or Washington, D.C.’s halls of power. It needs to talk to its customers the same way Apple and Amazon do–doing all it can to emulate companies that understand the great power consumers wield and the infinite market knowledge they possess.

2.Think like the consumer.

To better engage customers, banks need to think like the customers. They need to put themselves in consumers’ and small business’ shoes, recognize their pain points, and take steps to alleviate them.

Here, it isn’t the front-page scandals at the root of the problem, it’s a lack of transparency, a lack of innovation, and, above all, the fees. Ernst & Young finds that “clearer communication and transparency about fees is the most sought-after improvement globally.” At the same time, 44 percent of consumers report that banks don’t adapt products and services to meet their needs.


With high fees, low interest, and stagnant service, many consumers are wondering why a checking or savings account is a preferable alternative to their mattresses. They must also be wondering why ATMs cost some consumers $200 to $300 a year–especially when the public was told 30 years ago that ATMs would cut costs and save consumers money.

To transform their reputations, banks need to change the way they do business. Improved access to home, car, and student loans can’t be the only reason that consumers maintain relationships with their financial institutions. If the banks don’t change the status quo, you can bet that Walmart and Facebook will.

3.Don’t be afraid of the conversation.

Perform a Google search for terms such as “bank,” “loan,” “finance,” “home loan,” or “car loan.” What you find are individual offerings. The overarching narrative about the industry’s role as an economic engine is nowhere to be found. While industry trade associations work within the Beltway and the banks hawk their products, no one is communicating the most important message of all.

Where are the high-profile bloggers who can validate banks’ efforts to improve service and fiscal strength? Where is the social media outreach that creates the kind of customer loyalty that saved George Bailey’s skin? Where are the content management strategies that ensure that the flow of information is targeted and timely?


The American Bankers Association’s blogs are solid resources for bankers, but they have yet to be deployed as consumer outreach tools that can help move the overarching conversation about banks where it needs to be. Citi’s use of Twitter to solve customer service problems is a template that has yet to be widely emulated. These and other forays into social and digital media can’t be the exceptions when the industry’s audience has grown beyond watching golf on Sundays. They are essential first steps. The sooner they are taken, the better.

Closing the Trust Deficit

Winston Churchill famously said that “Men occasionally stumble over the truth, but most of them pick themselves up and hurry off as if nothing had happened.” The longer the banks emulate this wisdom and ignore the forces that are changing their industry, the wider the trust deficit will grow. Reputational problems aren’t just a cost of doing business; with the storm gathering, they are threats to banks’ very existence.

As such, the time has come for banks to assert more control over the narratives defining their industry. After all, not everyone has a guardian angel.

Follow Richard Levick on Twitter and circle him on Google+, where he comments daily on the issues impacting corporate brands.


–Richard Levick, Esq., Chairman and CEO of LEVICK, represents countries and companies in the highest-stakes global communications matters, from the Wall Street crisis and the Gulf oil spill to Guantanamo Bay and the Catholic Church. Mr. Levick was honored for the past four years on NACD Directorship’s list of “The 100 Most Influential People in the Boardroom,” and has been named to multiple professional Halls of Fame for lifetime achievement. He is the co-author of three books, including The Communicators: Leadership in the Age of Crisis, and is a regular commentator on television, in print, and on the most widely read business blogs.

[Image: Flickr user Daniel Kulinski]

About the author

Richard Levick, Esq. Chairman & CEO of LEVICK, represents countries and companies in the highest-stakes global crises and litigation