There is a huge lack of trust in UK financial services…
Lack of Trust: FSCS Data
In a May 2023 report, the FSCS found a huge lack of trust in the UK financial services industry. Here are some of their key statistics:
- 25% of consumers say they trust the UK financial services industry to act in the best interests of its consumers, with 31% saying they distrust it
- 42% are concerned about a lack of protection if things go wrong
- Out of 7 industries surveyed, the financial services industry was the second least trusted
The FSCS has an important role to play in fostering trust among consumers
Why is Trust Important?
Let’s have a look at what others had to say…
The FSCS has stated:
“Trust and confidence in the system is critical to financial stability. Without them, more people are likely to react to uncertainty and market turmoil by seeking to pull their money out of products or firms perceived as at risk, worsening liquidity and confidence pressures”
Further to this, a paper published by Brynchko et al argues:
“It is impossible to exaggerate the role of trust in the financial sector of the economy. Without trust, the financial system is deformed, and without a well-functioning financial system, it is impossible to ensure the macroeconomic stability and the potential for the country’s development”
Therefore, for the financial services industry to thrive, consumer trust is of the utmost importance, and it is indeed an issue that there is a continued (and growing) distrust in financial institutions. Financial institutions need to start putting consumer perceptions and experience at the forefront of their approach to delivering financial products and services.
How Can this Trust Be Built?
When consumers were asked by the FSCS what would improve their trust in the financial services industry:
- 54% said improved consumer protection
- 39% said legal consequences for activities that lose customers’ money
- 44% said the industry meeting the costs of compensation when providers go out of business
This is a great starting point for rebuilding this consumer trust. Other ideas are to:
- Improve transparency… how can consumers trust industries that aren’t being completely open and honest with them?
- Improve financial education… how can we expect people to trust financial institutions if they lack the understanding around financial topics in the first place?
- Have providers engage with their customers more effectively… instead of simply pushing products at consumers, they should be guiding, helping and listening to them. Instead of help being inaccessible, with communication restricted to virtual assistants and chatbots, financial services providers should be encouraging and enabling consumers to get in touch if they need to