financial:

Going Forward in a Time of Upheaval

The financial industry has been undergoing a major overhaul, which is exacerbated by the current economic recession; and this process has shaken the public’s attachment to financial institutions at their core. Public opinion, a major driver of the financial industry, has been upset by doubt. Trust in banks and other financial institutions has been effectively undermined.

This situation has led consumers, businesses large and small, and investors to rethink their use of financial institutions. Following a 25-year span that saw the growth of total U.S. debt outpace GDP growth by a factor of 4 to 1, unnecessary spending and the size of loans are being reined in while the stock market remains in turmoil. Additionally, the rules for and/or uses of credit cards, budgets, other financial management tools, credit models, other risk assessment tools and technology may never be the same.

Consolidation is another factor marking the changing landscape of the financial industry. It brings with it both greater convenience, stemming from a wider array of offerings from any given firm, and less bargaining power from limiting competition.    

Although the industry clearly has major problems, individual financial institutions can view this flux as an opportunity upon which they can capitalize. By working to understand and alleviate their customers’ concerns, and to attract new loyalties from non-customers whose faith in their existing service providers is shaken, individual firms can at least weather this storm, if not grow substantially. There are also many ways to take advantage of the economies of scale from consolidation as well as the overall need for new risk assessment tools.

As brands, financial services companies should face this doubt head-on. Let customers know how and why they can be trusted. Big financial services brands don’t have the assumed confidence they once did; in fact, size in the category may actually work against companies until they reestablish trust. Now is an opportune time for new brands to break through with a message of transparency and honesty. Size in and of itself has proven to not always matter.