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Tuesday 5 November 2019

The readout

How do banks regain trust?

The financial crisis was not the start and end of this debate. As our ThinkIn demonstrated, new challenges await

By James Harding

The question of trust in banks is so often framed in terms of the 2008 global financial crisis. But the ThinkIn in the Tortoise newsroom looked ahead and pointed to a different, creeping challenge to public confidence in banks.

Are we quietly entrenching a regressive financial system? Picking winners and losers by geography within countries? Lending to big companies while scaling back loans to small and medium-sized enterprises? Choosing customers by data-set and algorithm in a way that, perhaps unwittingly, favours some groups of people over others, improving financial inclusion globally but not for people and places left behind?

The fact that we can ask these questions is a measure of how far things have come in a decade. People today have a textured understanding of trust in banks, perhaps best demonstrated by what we look for in other businesses: personal service (hotels), reliability and convenience (supermarkets), safety (airlines). For all the speed and scale of change in financial services, people stick with their banks. Whether the citizen has confidence in them is different from whether the customer trusts them.

It’s easy to underestimate the scale of digital disruption to banks. It will change the business model and puncture any complacency in services and pricing. It will test the agility of banks lumbered by legacy and bureaucracy. And it will rewrite big bank culture.

But the issue of financial inclusion places as big a set of demands on the disruptors, whether coming from inside the banking industry or challenging from outside. It will force the fintech innovators, the platforms providing payment services and the app-based banking industry to understand that, alongside the need to be trusted by the customer, they are taking on systemic responsibilities for the economy and society.

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