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Brand authenticity is increasingly important to customers across many industries, and especially in times of crisis. To understand the relevance of customer attitudes towards their bank and relationship to business outcomes, J.D. Power has developed a brand authenticity index model[1] which is made up of 12 attributes that correspond with three dimensions: character, history & continuity, and branding relationship.

J.D. Power explores brand authenticity using findings from the 2020 Australia Retail Banking Satisfaction Study^SM. Following are the key findings.

Midsize bank banks are more authentic than Big 4 banks

Brand authenticity as perceived by customers has improved compared with 2019, up 17 points on a 700-point scale.

Heritage Bank ranks highest for a second consecutive year in brand authenticity among Australian banks, with an index score of 626.

Customer-Owned Banks performed well again this year, with Heritage Bank, People’s Choice Credit Union, and CUA ranking among the top 4.

Commonwealth Bank has the highest brand authenticity among the Big 4 Banks with a score of 514.

Bank of Melbourne has the highest year-over-year increase at +44, followed by ANZ (+38).

“In the past year, Australians have faced the worst ever bushfire season and a global pandemic,” said Bronwyn Gill, head of banking and payments intelligence at J.D. Power Australia. “Bank brand authenticity has been crucial, with customers looking for genuine support during their time of need. The Big 4 banks have made progress repairing customer trust; however, a sustained customer-first culture will be needed to avoid losing customers to midsize banks who offer their customers a more authentic experience that corresponds with higher satisfaction.”

Big 4 banks closing the gap on Midsize banks

The Big 4 Banks have made great strides in repairing authenticity post the Royal Commission into misconduct in the Financial Services industry, closing the gap on midsize banks for brand authenticity.

Although brand authenticity for the Big 4 banks is up 27 points from 2019, it still trails the Midsize banks, who also improved brand authenticity on year ago (+9 points). Character, which relates to a bank’s integrity and credibility, is the most important driver (56%) of a bank’s authenticity and continues to be where customers perceive the biggest difference between the Big 4 banks and Midsize banks.

Of the attributes that contribute to character, the largest year-over-year improvements for the Big 4 banks are for “a brand that delivers on its values,” “a brand that you can trust” and “a brand that cares about its customers.”

The Big 4 banks experienced improvement for all three factors contributing to brand authenticity, narrowing the gap to Midsize banks for character and branding relationship. History & continuity is the only factor for which Big 4 banks have higher scores than Midsize banks, and the lead over Midsize banks has widened this year.

Support during a crisis

The COVID-19 pandemic has disrupted banking and payments habits, resulting in fewer in-person interactions and a greater reliance on digital banking. Coinciding with this disruption has been increases in history and continuity scores for the Big 4 banks in particular, up 32 points from 2019. This is compared with a 13-point increase among Midsize banks. These increases are driven by improvements in customer perceptions relating to “a timeless brand” and “a brand that survives trends.”

During the time of the bushfires and pandemic, banks have shown support for customers and the broader community. There is, however, 29% of Big 4 bank customers and 24% of Midsize bank customers who say support was poor or just okay.

Trust

Trust is higher for customers of midsize banks compared with Big 4 bank customers. Specifically, Midsize banks have the widest lead for putting the interests of customers first. Customers of the Big 4 banks are more likely than the average bank customer to perceive their bank as profit-driven rather than customer-driven, and there has been no improvement in this for the Big 4 banks in the past year.

Fee Transparency

Midsize banks have fee structures that are more transparent than the Big 4 banks, with only 71% of Big 4 customers finding their bank’s fee structure to be transparent, which is significantly less than for midsize bank customers (83%).

Brand Authenticity matters

Brand authenticity has a direct effect on business outcomes. It is evident that customers who feel their brand is more authentic are not only more satisfied, but also less likely to switch, more likely to reuse the brand for their next account/product, and more likely to recommend the brand.

A bank’s reputation and negative media coverage are among reasons for customers switching from their previous bank, having greater importance for Millennials.

Westpac and ME Bank have the lowest brand authenticity, both having received negative press in late 2019 and early 2020 related to scandals. ME Bank’s brand authenticity score dropped 27 points compared with 2019.

The relationship between brand authenticity and overall satisfaction is strong. Banks that perform well with brand authenticity are more likely to have higher satisfaction than lower-rated institutions.

3 steps to improve brand authenticity

1. Put customers first. Banks must stop selling products. Instead they need to ask questions, listen and learn what their customers’ needs. Only offer products which a customer needs and understands.
2. Provide meaning to customers’ lives. No one wakes up in the morning excited about opening a bank account. They want to do something in their life. Sometimes it is as simple as paying their bills or saving their money. Sometimes it is meeting a life goal such as buying their first home or retiring. Banks should focus on what their customers want out of life and how they can help.
3. Focus on the long-term. Banks cannot focus on short-term earnings for the shareholder and still do what is right for the customer. Focusing on the long-term allows management to do what is in the interest of both customers and shareholders. High customer satisfaction leads to lower switching and deeper, more profitable relationships and shareholder returns will follow. Bank leaders must have a significant portion of their compensation based on customer satisfaction. Customer satisfaction should be measured by an independent third party and benchmarked against competitors.

Methodology

This J.D. Power Banking Industry Insight is based on the J.D. Power 2020 Australia Retail Banking Satisfaction Study.

Now in its fifth year, the study measures overall satisfaction in six key factors: channel activities; convenience; product and fees; communication and advice; account opening; and problem resolution. The study is based on responses from 5,584 retail banking customers and was fielded in May-June 2020.