Voice of the Industry

Trust is hard to gain but easy to lose - a bank's reputation

Wednesday 23 June 2021 08:45 CET | Editor: Mirela Ciobanu | Voice of the industry

Customers do not want to keep their money with a bank/financial institution that they do not trust

Many financial service providers have been a source of customers’ mistrust because of the 2008 financial crisis, money laundering, accounting fraud, and other scandals involving banks/banks’ executives, data breaches, or other illegal practices. To build and maintain a reliable and trustworthy environment, financial regulators across the world have created regulations for financial institutions (FIs) to comply with and constantly keep an eye on these.

However, banks complain about complex and costly compliance obligations which have generated limited benefits either in terms of fighting financial crime or aiding the reputation of the obligated entities themselves. Because compliance has often been an oppressive burden/cost, firms have mainly focused on a tick-box approach to please regulators.

Meeting compliance may be perceived by many banks as an expensive burden. However, if it is done intelligently by using tech, being part of a KYC/AML utility, or sharing data with peers to fight fraud, meeting compliance is not that costly. And when compared to the price a bank must pay to repair its brand, after it was featured on the front page of financial magazines as the main protagonist of a money scandal (not to mention the value of the penalty/fine), compliance doesn’t seem that costly.

A bank’s reputation remains a hugely important consideration for consumers. Statistics show that 35% of consumers (from an NCR survey on 1,000 UK adults, aged 16+) rated a banks’ reputation as one of the top three most important things about their bank. Moreover, for Millennials and Gen Z – which are the dominant customer segment targeted by banks, integrity and authenticity are consistently the top drivers of consumer preference in financial providers.

Regulation … a burden?

While regulatory reforms are necessary to increase the resilience of financial institutions, maintain financial stability, and build trust in the financial system, businesses claim that frequent changes to financial regulation and its growing complexity is placing a disproportionate burden on them.

However, a recent LexisNexis study revealed that financial institutions that allocate more financial crime compliance expenditures to technology realise smaller cost increases compared to those with lower technology spend. Moreover, firms across APAC that allocate a higher percentage of compliance spend to technology have comparatively lower overall compliance cost, at an average of USD 14.6 million annually compared to USD 18.1 million for those dedicating higher spend to labour, the study continues. Financial institutions that allocate a larger share of their financial crime compliance costs to technology also have lower costs at USD 61,300 per compliance professional annually compared to USD 115,400 for firms that allocate more for labour.

The reputation risk

To prevent and mitigate banking reputation risk, financial institutions/banks are advised to demonstrate business integrity first, by setting high standards for the way they do business and have clear business practices and policies. Second, take ownership of some of the damage they have caused because many times these are consumer-facing businesses and they need to start presenting themselves as ‘human’. With more users turning to digital banking solutions, banks are also advised to constantly monitor their business name. This allows them to know what is being said about the bank and their staff so that institutions can respond to it appropriately. Finally, promote positive reviews as consumers might be inspired to write a bad review after they have had a negative experience with that financial institution. To tackle these occasional complaints is to actively promote positive reviews for the business.


People tend to select companies with which they know their money will be well kept and where it will not be used for notorious purposes. Overall, despite some widespread industry assumptions to the contrary, the evidence suggests that meeting compliance and self-interest can go together. If done with a focus on well-calibrated risk-based processes and controls, compliance not only helps fight financial crime and protect the business and its clients but also enables businesses to grow.

This editorial was first published in our Financial Crime and Fraud Report 2021 - How to Fight Fraud and Master KYC, Onboarding & Digital ID, which provides a comprehensive overview of the major trends driving growth in fraud prevention, identity management, digital onboarding and KYC, transaction monitoring, financial crime compliance, regtech, and more.

About Mirela Ciobanu

Mirela Ciobanu is a Senior Editor at The Paypers and has been actively involved in drafting industry reports, carrying out interviews, and writing about innovation in payments and fintech. She is passionate about finding the latest news on AI, crypto, blockchain, DeFi and she is an active advocate of the need to keep our online data/presence protected. Mirela has a bachelor’s degree in English language and holds a master’s degree in Marketing. She can be reached at mirelac@thepaypers.com or via LinkedIn.

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Keywords: banks, trust, compliance, AML, KYC, money laundering, regtech
Categories: Fraud & Financial Crime
Countries: World
This article is part of category

Fraud & Financial Crime