Rebuilding Consumer Trust in Savings & Investments

Table of Contents

OVERVIEW

• Catalyst
• Summary
• Methodology

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
  • 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

TABLES

• Table: Trust in banking industry and average amount saved*
• Table: Average likelihood of future activity by trust in the entire banking industry
• Table: Average likelihood of future activity by perceptions of recession*
• Table: Average likelihood of future activity by changes in household finances
• Table: Level of concern in saving and investment before economic conditions worsened
• Table: Average current level of concern in savings and investment
• Table: Average amount saved in frequency and value, by country
• Table: Frequency of saving by country
• Table: Average level of trust in primary bank and banking industry and average amount saved US$*
• Table: Average level of trust in primary bank and banking industry and difference in trust levels
• Table: Level of loss of trust in banking due to the credit crunch by country
• Table: Average level of trust in primary bank and banking industry and share of non-savers
• Table: Savings and investment share by type of institution
• Table: Share of savers with type of savings and investment product*
• Table: Level of trust in banking industry by type of financial institution
• Table: Average likelihood of future actions over next six months by type of financial institution*
• Table: Level of trust in banking industry by type of savings and investment product
• Table: Average likelihood of future actions over next six months by type of financial institution

FIGURES

• Figure: The Datamonitor Trust Process
• Figure: Increased trust helps to build up customer acquisition/retention and improve performance
• Figure: Customers queuing outside Northern Rock as they lose their trust in the bank' s business model
• Figure: Consumers globally feel that government and businesses share responsibility for the crisis
• Figure: 53% of consumers globally feel that government should be held most responsible for solving the financial credit crisis
• Figure: 64% of Indonesian consumers believe government and regulators are most responsible for solving the financial credit crisis.
• Figure: Trust and savings are strongly related
• Figure: Higher trust in the banking industry leads to an increase in saving and investing
• Figure: Recessionary fears lead to a lower likelihood of future savings
• Figure: Household finances are the strongest driver of savings and investment activity
• Figure: The downturn has shifted focus from long-term investment to short-term savings
• Figure: Savings activity shows strong variations by country, by frequency and by value
• Figure: China, India, and Singapore are the most regular savers
• Figure: Regions with high levels of trust in banking have higher savings
• Figure: Western regions have the lowest levels of trust in the banking industry
• Figure: The UK and US have lost the most trust in the banking industry due to the downturn
• Figure: Higher levels of trust lead to higher levels of saving by region
• Figure: Banks are the dominant player in S&I activity with a 56% market share
• Figure: 41.1% of savers hold instant access savings accounts
• Figure: Building society consumers and those unsure of their situation have the lowest trust in the banking industry
• Figure: More complex institutions are likely to see a minor increase in activity in the near term
• Figure: Consumers with complex savings products have higher levels of trust
• Figure: Consumers with offshore savings accounts will be the most active in the next six months
• Figure: Visibility as a historic or familiar brand can help improve trust as consumers seek security
• Figure: Positive imagery that admits past problems can quickly change consumer attitudes
• Figure: Financial institutions should become involved with programs such as mymoney.gov