Can US Banks Use Brand Trust to Drive Growth?

These are not easy times for the US banking sector. Equity valuations have taken a beating following the failure of Silicon Valley Bank and New York-based Signature Bank back in March. The Dow Jones US Bank Index is down -11.6% for the last year. The Kansas City Federal Reserve recently reported that US banks are sitting on $550 billion in unrealized losses (assets that have decreased in price but haven’t been sold yet). This is a result of rising interest rates creating a credit crunch, and significantly slowing business and consumer lending (primarily mortgages and auto loans).

Earlier this year the Economist published a story called “How deep is the rot in America’s banking industry?” asking if the SVB fiasco may be the start of something grimmer. These bank failures beg the question: was this simply a matter of poor risk management and governance on the part of the two failed lenders, or were the collapses reflective of a more substantial contagion? Depositors are continuing to drain cash from bank accounts, opting for money market accounts and other investments. Recent data from the Federal Reserve suggests that commercial & industrial lending is showing declines this year.

Clearly storm clouds are gathering on the horizon for most US-based banks, especially as all this news is eroding the trust of both consumers and business banking customers. According to the 2023 Edelman Trust Barometer, financial services is the second-least-trusted sector – lower than 15 other business sectors and just above social media.

The Importance of Trust

For banks to attract and retain customers, they need to build and maintain high levels of trust in the products and services they offer. This is especially important in these times of economic uncertainty. Traditionally, trust was based on longstanding business relationships, built primarily through face-to-face business interactions either at bank branches or in meetings with business banking officers. But more and more banking services are moving online, with many customers’ banking transactions done via laptop computer or smartphone app.

The Harvard Business Review reported back in 2015 (assessing the fallout of the 2008 financial crisis) that banks should focus on three key elements to build trust:

• Ability (are you competent?)
• Integrity (are you honest?)
• Benevolence (do you care about my interests?)

These recommendations are still quite valid as the cornerstones of a well-defined bank brand.

Perhaps focusing on benevolence is the best way to build trust. But you must be sincere about caring about others. It starts with letting your employees know it is an important corporate value, which in turn can lead to building trust with customers. This needs to be reflected in the actions and decisions taken by the bank (starting with senior officers) and connecting on a personal level with customers. This approach needs to be carefully balanced with the increased use of remote-banking technologies – in the form of apps and web-based platforms. In essence, the winning formula is a combination of “high-touch” and “high-tech.”

Offering competitive services, attractive interest rates and timely problem resolution is a great way to help build trust with customers. Falling short in these areas is often cited as a reason people and businesses switch banks. Make sure branch-based managers and B2B relationship officers are empowered to fix client problems fast. Then use marketing to tell your customers, prospects, and community that their interests come first – even in these uncertain times. The dividends this approach will pay back will be likely be significant.

Branding Basics

A bank’s brand should be based on a well-articulated strategic positioning statement. It is a concise description of your target market(s) and a compelling picture of how you want those markets to perceive your bank versus the competition. Differentiating a business at this level is quite necessary, as many banks offer similar deposit products, demand-deposit accounts and loans.

Keep in mind that different employees are likely to talk about the bank in various ways to your customers and prospects as well. As one savvy senior bank officer once observed: “Every time one of our officers, branch employees or customer service reps opens their mouth, they can reposition our bank.” A clearly defined strategic positioning statement and brand can help address this problem.

Many senior bank officers typically don’t understand or appreciate the value of brand, as it is not likely to be considered a key part of the banking business model. I can remember more than once getting a very unapproving look from the CEO and other C-level executives when, as VP of Marketing at a large NYC-based community bank, I presented my annual marketing budget request. “Why do we even need marketing or a brand?” was a typical question.

The challenge for savvy bank marketing officers is to demonstrate to C-level management that marketing is in fact an investment that can and will pay positive returns. A good customer relationship management platform (like Salesforce) can use data to track marketing campaign effectiveness based on key performance indicators (KPIs) like cost-per-customer acquisition and increases in assets.

Best Practice Community Bank: CFG Bank

An excellent example of a well-run and well-marketed community bank is the $5.08 billion CFG Bank based in Maryland. Bankrate.com rated CFG as the best regional bank in the country; the firm’s tagline is “We’re transforming the banking experience.” Not surprisingly, it offers a full range of deposit products, and its money market account and CDs offer very competitive yields.

The cornerstone of CFG’s corporate positioning focuses on the benefits it offers customers, including being trustworthy and respectful, entrepreneurial, bold (acting decisively and thinking outside the box to offer creative solutions), tenacious and focused on personal relationships with clients, employees and communities.

Jack Dwyer (Owner and Chairman of the Board of CFG) observed, “I am always here to listen to everyone in the organization – it’s the best leadership skill.” As Bill Weidel (President & CEO of CFG) added, “CFG does banking like no one else; we do business the right way. We treat people really well.” Using this people-first approach effectively instills trust in the bank’s employees and customers alike.

A community wellbeing focus is used as well, as in 2021, when CFG launched a nonprofit organization that aids individuals who lack opportunity and are interested in pursuing a career in healthcare. The bank also contributes to community organizations that support education, recreation and poverty alleviation.

Using a bank’s brand to help build trust is a great place to start on the road to long-term profitable growth, that will in turn typically drive increases in a bank’s equity valuation. This sort of outcome will bring a smile to the face of even the most skeptical CEO or CFO. And be sure to bring your marketing KPI data an Excel spread sheet – the de facto format for conveying the value of the effort.

Here at Copylab, our team of experts can help you develop a clear and compelling brand positioning statement that differentiates you from your competitors and resonates with your target audience. We can also provide guidance on how to effectively convey your unique message through various marketing channels and touchpoints. Get in touch to find out more.