Why Trust Is Tech's Biggest Challenge

February 26, 2018

FinTech Faceoff

Suspicion of financial providers still runs deep, so can unfamiliar and untested newcomers hope to bridge the trust gap with consumers?

“Fintechs will rebuild a trusted relationship through technology.” This was the confident prediction of Colin Walsh, co-founder and CEO of Varo Money, at the Money20/20 event.

Is it a realistic proposition? Consumers have understandable issues with technology, not least on security grounds.

Yet evidence is emerging that new business models shaped around the customer have the power to foster trust. And brand trust is a critical factor that marketers should be paying close attention to.

Trusted for loans, not for savings

Fintechs can already score particularly highly on trust by entering the conversation with authenticity, according to Edelman’s 2017 Trust Barometer. There are high levels of trust among the informed population in subsectors, including mobile/telecom at 72 percent and blockchain at 64 percent.

The picture is mixed in more mainstream services. At present, people are more likely to trust fintechs for smaller transactions, but reluctant to entrust them to look after their current account or retirement finance.

Consumer research by Decision Technology in the United Kingdom found that consumers are more open to considering fintechs for personal loans than for other products.

The researchers put this down to “loss aversion,” a tendency to be more sensitive to potential losses than potential gains. This means customers are more willing to trust unrecognized brands when borrowing money than when saving.

Finding a higher purpose

Broadly speaking, trust is defined by two elements: reliability and regard. Reliability is about a consumer’s belief that a provider will not rip them off, or leave them vulnerable through a data breach. In this respect, incumbents with scale still hold a trust advantage.

Regard is about being held in high esteem. This is where newcomers have the ability to gain an edge, by demonstrating a sense of purpose.

BlackRock CMO Frank Cooper was eloquent in LinkedIn’s Currency of Trust campaign on the need for financial brands to be able to define a higher purpose, and then live up to it: “Why do you exist? What do you believe in? In the answers to these questions lie the foundation of customer trust.”

Plenty of challengers are putting purpose at the foundation of their offering. Aspiration is a socially-conscious banking platform based, says founder Andrei Cherny, around trust and a “pay what is fair” model.

Fast-evolving big players recognize this imperative too. Ralph Hamers, CEO of ING Group, says its purpose – empowering people to stay a step ahead in life and in business – drives the business and helps it “declutter.”

At last, data can bring us closer

Data can be harnessed as an aid to this kind of purpose, differentiating providers and fostering trust. Jeffery Yakubi, CEO of fintech services leader Fiserv, describes this as the holy grail of customer engagement.

Through their transactions, he points out, customers are telling providers everything we need to know about their lives. Yet until now, the volume of data has outstripped the ability to make best use of it.

Today, the most progressive platforms are using the data they generate daily to deliver a better experience to customers. OpenBank, for instance, has used machine learning – whose potential is barely harnessed yet by incumbents – to make the credit card application process smoother. As a result, acceptance rates have soared.

And there are examples of platforms already succeeding by explicitly putting data to good use. Investment platform Betterment, for instance, puts transparency at the heart of its offering, promising to avoid the “black boxes” built by traditional providers. It has automated processes to “nudge” customers if their investment decisions might be veering off course.

Fintechs and trust: now join the debate

Not everyone is as convinced as Varo’s Colin Walsh that fintechs are on course to restore trust. But there’s a consensus that digital trust is the central challenge facing the industry.

As Jeffery Yakubi has said, “Banks own trust in the physical world. It’s not clear to me that we will continue to own it over time.”

Top fintech influencers from the US and Europe will debate these issues at FinTech FaceOff on Tuesday, February 27. CapGemini and LinkedIn, in collaboration with 11:FS, have gathered the experts for this world first – and you can vote for the most convincing vision of the future. Register here.