Rebuilding Consumer Trust in Savings & Investments

Published by: Datamonitor

Published: Aug. 3, 2009 - 943 Pages

Table of Contents

Overview

Catalyst

Summary

Methodology

Table of figures

Table of tables

Introduction: Trust in the context of Financial Services

Defining the intangible: what is trust?

Datamonitor's Trust Process attempts to capture both the static and the dynamic elements of consumer trust

An improved level of trust can directly benefit customer acquisition, retention and overall performance

Trust is critical to savings and investment

Trust is manifested in the market through a variety of means

Once lost, trust is hard to recover but is relative to the distrust felt for other organizations

Long queues outside branches were evidence of a loss of trust in Northern Rock

However, trust is a fickle emotion, subject to the relative distrust of others

The collapse of Fannie Mae and Freddie Mac is another example of the fallout from lost trust

A wider range of stakeholders must take responsibility for rebuilding trust and this is the real challenge for the industry

Industry bodies must accept their own responsibilities and avoid passing the buck

Future Decoded

Trend: Levels of savings and investment are impacted by more than trust alone

Insight: Higher trust leads to higher savings

Insight: Recessionary fears and household finances have a significant impact on savings

Trend: Savings habits are changing

Insight: Savers are focusing on instant access over long-term growth

Trend: Savings and investment varies by region

Insight: BRIC and Asia Pacific have higher trust and savings levels than the West

Western economies have low levels of trust which leads consumers to save and invest less

Insight: Trust levels are built up and lowered over time

Trend: Trust levels are higher for more complex savings and investment products

Insight: Trust levels are higher for more sophisticated products and institutions

Building society/co-operative clients hold the lowest trust

Sophisticated institutions will see greater long-term investments and higher savings

Sophisticated products hold significantly higher trust levels

Holders of sophisticated products will be the most active in the near term

Action points

ACTION: Focus communications on both recessionary fears and trust issues

Familiarity breeds trust

Honest and clear communications will restore trust

Being pro-active in helping consumers who fall into difficulties will alleviate recessionary concerns and improve trust

ACTION: Work with other stakeholders for a conjoined effort in restoring trust

ACTION: Educate consumers about savings products and the wider financial system

ACTION: Focus on products that provide easy access and liquidity for consumers

APPENDIX

Methodology

Further reading

Ask the analyst

Datamonitor consulting

Disclaimer

List of Tables

Table 1: Trust in banking industry and average amount saved*

Table 2: Average likelihood of future activity by trust in the entire banking industry

Table 3: Average likelihood of future activity by perceptions of recession*

Table 4: Average likelihood of future activity by changes in household finances

Table 5: Level of concern in saving and investment before economic conditions worsened

Table 6: Average current level of concern in savings and investment

Table 7: Average amount saved in frequency and value, by country

Table 8: Frequency of saving by country

Table 9: Average level of trust in primary bank and banking industry and average amount saved US$*

Table 10: Average level of trust in primary bank and banking industry and difference in trust levels

Table 11: Level of loss of trust in banking due to the credit crunch by country

Table 12: Average level of trust in primary bank and banking industry and share of non-savers

Table 13: Savings and investment share by type of institution

Table 14: Share of savers with type of savings and investment product*

Table 15: Level of trust in banking industry by type of financial institution

Table 16: Average likelihood of future actions over next six months by type of financial institution*

Table 17: Level of trust in banking industry by type of savings and investment product

Table 18: Average likelihood of future actions over next six months by type of financial institution

List of Figures

Figure 1: The Datamonitor Trust Process

Figure 2: Increased trust helps to build up customer acquisition/retention and improve performance

Figure 3: Customers queuing outside Northern Rock as they lose their trust in the bank's business model

Figure 4: Consumers globally feel that government and businesses share responsibility for the crisis

Figure 5: 53% of consumers globally feel that government should be held most responsible for solving the financial credit crisis

Figure 6: 64% of Indonesian consumers believe government and regulators are most responsible for solving the financial credit crisis.

Figure 7: Trust and savings are strongly related

Figure 8: Higher trust in the banking industry leads to an increase in saving and investing

Figure 9: Recessionary fears lead to a lower likelihood of future savings

Figure 10: Household finances are the strongest driver of savings and investment activity

Figure 11: The downturn has shifted focus from long-term investment to short-term savings

Figure 12: Savings activity shows strong variations by country, by frequency and by value

Figure 13: China, India, and Singapore are the most regular savers

Figure 14: Regions with high levels of trust in banking have higher savings

Figure 15: Western regions have the lowest levels of trust in the banking industry

Figure 16: The UK and US have lost the most trust in the banking industry due to the downturn

Figure 17: Higher levels of trust lead to higher levels of saving by region

Figure 18: Banks are the dominant player in S&I activity with a 56% market share

Figure 19: 41.1% of savers hold instant access savings accounts

Figure 20: Building society consumers and those unsure of their situation have the lowest trust in the banking industry

Figure 21: More complex institutions are likely to see a minor increase in activity in the near term

Figure 22: Consumers with complex savings products have higher levels of trust

Figure 23: Consumers with offshore savings accounts will be the most active in the next six months

Figure 24: Visibility as a historic or familiar brand can help improve trust as consumers seek security

Figure 25: Positive imagery that admits past problems can quickly change consumer attitudes

Figure 26: Financial institutions should become involved with programs such as mymoney.gov

Abstract

• Using Global consumer data from our Financial Services Consumer Insight survey this report identifies the extent to which trust has been lost
• The report analyses the causes of this shift & identifies strategies that can be employed to rebuild trust and attract & retain savings customers.
• The report discusses what trust means in the context of savings and investment and what it means for customer acquisition and retention
• A number of key trends are highlighted that describe the interplay between trust, attitudes and behaviour in the wake of the credit crunch

• Access the results of Datamonitor's Global FS Consumer Insight survey, enabling you to understand the drivers behind loss of trust in your industry
• Identify actionable strategies that can help encourage consumers to save and invest
• Understand why trust matters, and the effect it has on the bottom line

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