Attendees of this year's Digital Banking 2019 event - the largest of its kind in the industry and organized by American Banker - got an exclusive preview of insights from this year's US Banking RepTrak® Study.
Every year Reputation Institute – in association with American Banker – assesses the reputation of the US Banking Industry in the context of their Banking RepTrak study. The study is based on close to 13,000 individual ratings by the general public, customers and non-customers alike. It includes the 40 most prominent, regional and non-traditional banks based on asset size that have a significant retail presence.
To be included as part of the study, respondents must be familiar with the banks they are asked to evaluate and have an informed opinion regarding the state of the banks' reputation.
In line with the main themes of the event, including innovation in financial services for consumer and commercial customers, Reputation Institute offered a workshop exploring how much innovation matters for the banking industry when looking through the lens of reputation.
The role of innovation in the Banking industry
What our findings show is that Innovation (i.e. being perceived as innovative and first to market with new solutions and adaptive to industry changes), has the lowest impact on a bank's reputation for both customers and non-customers. This is a consistent insight across various stakeholders and groupings (influencers, gender, generation, bank type, potential employees, political affiliation).
2019 Banking Industry Reputation Dimension Drivers
Instead, the two most important reputation dimensions (highlighted in blue) are Products/ Services and Governance for both groups, supplemented by Leadership and Financial Performance for customers and Citizenship (societal contributions) for non-customers.
But why do we see such low levels of importance for Innovation?
The answer may lie in what banks tend to focus on when it comes to their innovation efforts. Innovation that tends to focus on product characteristics, technological process improvements, and customer experience – all of which are part of the the top ten trends for the retail banking industry in 2019, miss content areas of high importance, as illustrated above.
The same insights apply to the role that innovation plays in managing reputation risk. Our study findings highlight the fact that the most reputation-damaging risks are not linked to data privacy or customers’ inability to acesss or use products/services, but rather revolve around banks’ ethical behavior in how they treat their employees and customers.
Clearly, the first challenge that banks face when it comes to innovation, is to align on the important content on which efforts it should focus.
How are banks rated on their innovation efforts? - and why?
Given banks' product-focused innovation efforts, how do customers and non-customers rate their performance on this reputation dimension?
2019 Banking Industry Reputation Dimension Scores
As the chart illustrates, Innovation that “misses the mark” translates into disenchantment among both customers and non-customers – but also creates opportunity for growth. Currently perceived Innovation performance is the lowest among all reputation dimensions. This finding is also largely consistent by customer status, demographic groups, influencer status, bank type and political affiliation
The second challenge we uncovered is that of changing stakeholder perception of how well banks are actually innovating - which goes hand in hand with striking the right chord on what to innovate around.
But the challenge for banks - and another contributing factor to low performance scores - is a clear lack of perceived differentiation when it comes to innovation:
This lack of differentiation play out twofolds when it comes to banks' reputation: It depresses the perceived importance in driving reputation as well as banks’ perceived performance on this dimension are low.
What banks should remember
Sven Klingemann, PhD