MakovskyThursday, May 28, 2015
73% of U.S. Consumers Likely to Switch Financial Services Provider due to Breach or Theft of Personal Data; 61% Indicate Trust in Financial Institutions is Still Missing
44% of Financial Services Companies Report 20% or More Loss in Business in Last 12 Months Due to Reputation and Customer Satisfaction Issues; Average Loss at 17%, Almost Double Over 2014
New York, N.Y. (May 28, 2015) — The 2015 Makovsky Wall Street Reputation Study released today revealed that 42% of U.S. consumers believe failing to protect personal and financial information is the biggest threat to the financial services firms’ reputation they do business with on a regular basis, and most said they would take their business elsewhere if it happens. The study also found that 83% of executives at financial service firms agree the ability to combat cyber threats and protect personal data will be one of the biggest issues in building reputation over the next 12 months.
These are major findings of the fourth annual 2015 Makovsky Wall Street Reputation Study, designed to determine the state of reputation of the financial industry and identify best practices and emerging trends and issues. The study was conducted by Ebiquity in March 2015.
“Consumer dissatisfaction and questions of trust are issues that financial services firms continue to address with seemingly little progress,” said Scott Tangney, Executive Vice President at Makovsky. “The basics of protecting personal data and preventing fraud have become critical for financial institutions to retain customers and rebuild trust.”
The Makovsky study found that nearly three-quarters (73%) of U.S. consumers said that the unauthorized access of their personal and financial information would likely lead to a switch to an alternative financial service provider. In fact, security of personal and financial information is much more important to customers compared to a financial services firm’s ethical responsibility to customers and the community (23%). Almost six out of ten (57%) of marketing and communications executives at banks and other financial services companies (up slightly from 2014) said a major data breach would have a serious negative impact on their company’s reputation.
Signaling a fitful relationship, the majority of consumers have not regained trust in financial institutions since the 2008 financial crisis. Two-thirds (68%) of consumers report that even negative news about their current financial services firms – regulatory issues, illegal activity, fines, etc. – will likely make them switch providers, compared to other reasons for switching like lower cost or fees (63%) or advanced mobile technology (48%) to obtain more helpful financial focused services (i.e., mobile technology).
Financial service companies said data breaches have created major negative reputation and customers satisfaction issues. When asked to rank the issues that negatively affected their company’s reputation over the last 12 months, the top three “strongly agree” responses in 2015 from communications, marketing and investor relations executives at financial services firms were:
- Financial performance (47%), up from 27% in 2014
- Corporate governance (45%) , up from 24% in 2014
- Data breaches (42%), up from 24% in 2014
With 44% of financial services companies reporting 20% or more business lost in last 12 months due to reputation and customer satisfaction issues, more than three quarters (78%) of communications, investor relations and marketing executives surveyed said the financial crisis continues to have a major effect on stakeholder perceptions of their companies.
“When it comes to financial services, trust is the most delicate matter because of the lingering effects of the financial crisis and resulting recession. We have discovered the customer is ready for change and something like a data breach or major fine by a regulator provides the perfect reason,” said Tangney.
When asked about the impact of the financial crisis on their lifestyle over the past seven years, consumers’ top responses were:
- Not able to save (live paycheck to paycheck) – 29%
- Significant spending cut backs – 26%
- Financial hardship – 24%
- Loss of funds in my retirement account/diminished value – 22%
With low trust in financial institutions and an uncertain environment with business model disruption and regulatory change, 77% of financial company marketing and communications executives are concerned about losing customers to alternative financial services providers like Apple, Google, Amazon, Lending Club, etc.
But when asked which institution they trust more with their personal information and safeguarding privacy, today’s consumers ranked traditional financial institutions higher by a wide margin over new online providers. A larger percentage of consumers however, are untrusting of any organization having the ability to protect data:
- Bank/brokerage, insurance, or credit card company (33%)
- U.S. Government (IRS, Social Security) or U.S. Postal Service (13%)
- Current healthcare company (4%)
- Online wallets (PayPal, Google Wallet, Apple Pay) (4%)
- Retail chain or small businesses (4%)
- All other (3%)
- None of these organizations or companies can be trusted (39%)
“Developing an advantage in cybersecurity and special programs to safeguarding personal information would be a game-changer for financial services firms to win back trust and retain customers,” said Tangney. “Regardless, companies need to be ready to respond and recover with the customer a first priority once a data breach occurs.”
Ebiquity completed 227 interviews with executives and managers responsible for the management and supervision of communications, investor relations or marketing at large and mid-sized publicly traded and private financial services institutions. Additionally, Ebiquity polled a random sample of 1008 adults representing the general U.S. population. Both surveys were completed online.
The type of companies surveyed included banks, brokerage firms, asset management firms, insurance companies, real estate companies, credit card companies, mortgage lender, venture capital firms and credit unions and financial technology firms. Respondent titles included Chief Marketing Officer, Vice President, Director and Manager/Supervisor. The study conducted online and completed in March 2015. The margin of error associated with this level of reporting is +/- 3.1% (consumers) and +/- 6.5% (executives) at a 95% confidence level.
Founded in 1979, Makovsky (makovsky.com) is one of the nation’s largest and most influential independent integrated communications firms. The firm attributes its success to its original vision: that the Power of Specialized Thinking™ is the best way to build reputation, sales and fair valuation for a client. Based in New York City, the firm has agency partners with nearly 2,000 professionals in 100 cities through IPREX (IPREX.com), the second largest worldwide public relations agency partnership, of which Makovsky is a founder.
Ebiquity is a leader in above- and below-line communications tracking and research, providing independent data-driven insights to the global media, CMO and CCO community to continuously improve clients‟ business performance”.