Researchers have warned that major change in the banking industry will be a slow process. Efforts to bring about a change in banking culture and repair the damage done to public trust in recent years will take a generation to pay off, according to a report.
The report recognised that banks are making real efforts to bring about change and to regain the trust of the public. However, it also said that “an entire generation of staff have been raised, and some instances promoted, in an aggressive sales culture.” As such, real change in banking culture – something on which improvement in public image likely depends – will likely not take effect until a new generation raised in a different culture have come into the industry.
Public trust in the banking system has been seriously damaged in recent years by various factors. The global financial crisis, for which much of the blame lay at the feet of major banks, was one of the most significant factors. Mis-selling scandals, notably the PPI scandal, have also eroded the public image of banks and other lenders. Inappropriate products have been sold to customers on a large scale using aggressive sales tactics in order to boost profits.
The uncovering of such scandals has rocked the banking industry and sowed serious doubts about the honesty of banks in the minds of the public. Since the financial crisis, 20.8 million complaints have flooded in according to recently-formed think tank New City Agenda who commissioned the research. As a result, since the year 2000 banks have set aside a combined total of £38.5 billion to cover the cost of paying compensation to customers and meeting fines. The Payment Protection Insurance (PPI) scandal alone accounts for £27 billion of this total, and is the biggest scandal to hit the banks in some time if not ever.
In spite of the scandals and genuine efforts on the part of banks to effect a culture change, researchers found many of the banks’ frontline staff admitted to feeling like they were under “significant pressure” to make sales.
Nonetheless, the report did uncover some positives. For example, initiatives seen in some small challenger banks to improve customer service using principles borrowed from the leisure industry were hailed as encouraging.
The research was carried out on New City Agenda’s behalf by Cass Business School. It used interviews and documentation from eleven banks, as well as from sixteen other relevant organisations.