The Fairer Finance Trust in Banking Index

Every six months, Fairer Finance polls around 10,000 banking customers via the pollster Opinium to ask them how much they trust their provider.

Using our polling data - which goes back to 2015 - we have created 'Trust in Banking Index'. This index tracks how far the public trusts their banking providers and measures how attitudes have changed over time.

Since we started collecting data in 2015, there has been a significant rise in public trust in banking providers. This rise has occurred across banking sectors, encompassing current accounts, savings accounts, credit cards, mortgages and personal loans.

Mortgages and personal loans providers have tended to be less trusted, on average, than current account, savings or credit card providers. Since interest rates began to rise from historic lows in 2022, there has been a levelling off in trust in mortgage and personal loan providers. In fact, distrust of mortgage providers has started to tick upwards. Trust in current account and savings account providers, on the other hand, has continued to rise since 2022.

By deducting the percentage of customers who don't trust their provider from the percentage that do, we can make a single trust score and 'trust in banking index' to track this score over time.

The current state of the banking sectors, in terms of trust, is shown in the table below.

The Financial Conduct Authority, through its Financial Lives survey, also tracks public trust in banks. In each survey, respondents are asked 'In general, how much trust do you have in banks?'. The same question is asked about mortgage lenders and credit card companies.

Unlike the Fairer Finance data, the Financial Lives survey is asking about banks in general rather than the specific provider that the company uses. The figure below shows that the Financial Lives survey reveals greater levels of public distrust (roughly 0-4 on their ten-point scale) than the Fairer Finance data, though there has been a modest improvement between 2020 and 2022. This is to be expected, since respondents are likely to have greater trust in the bank they have chosen and know than in banks in the abstract. Banks are more trusted than either mortgage lenders or credit card companies, repeating the pattern of the Fairer Finance data where lending sectors have lower levels of trust than current accounts or savings.

Trust in Current Account Providers

The most commonly-held banking product is a current account. Since 2015, the proportion of respondents saying they 'strongly agree' that they trust their current account provider has been steadily rising.

Despite the overall upward trend, there is a wide variation between providers when it comes to trust. Starling, Monzo and First Direct - none of which are traditional banks - have close to 60% of customers strongly agreeing that they trust them. HSBC, TSB and RBS - all more established high street banks - have around 30% of customers giving this response.

NatWest saw a fall in its level of trust between Spring 2023 (polling done in February) and Autumn 2023 (August). The percentage responding that they disagreed or strongly disagreed that they trusted NatWest rose from 3.76% to 5.27% (above the average of 4.23%). This is likely connected to the negative publicity created around the Nigel Farage debanking scandal earlier this year.

What drives trust in current account providers?

One trait that highly-trusted current account providers have in common is that they have top-quality apps and websites. Starling and Monzo, the two most trusted banks, are both 'challenger' banks that provide banking services solely through their digital platforms.

Our polling data shows that there is a strong correlation between how highly customers rate a provider's digital services and how much they trust them.

This connection may be down to the fact that many banking tasks, such as checking balances, transferring money, and setting up direct debits, are now done digitally. If customers can reliably perform these functions through their app, then they will have no reason to distrust their provider.

In fact, if customers can use their app for other tasks, such as budgeting or tracking payments, this may help to build trust. The banks that are relatively behind on trust, then, such as TSB, HSBC and RBS, should make improving their online services and apps a priority.

We also ask customers why they are satisfied with their current account provider. This data shows that the most trusted providers tend to fill different niches, which lead their customers to be positively disposed towards them:

• Starling and Monzo have apps that are more highly rated than their competitors; they also have better budgeting tools and get credit for their low foreign use fees

• First Direct excels on customer service

• Nationwide's large branch network is appreciated by its customers

• The Co-operative Bank is seen as more "green" than other large banks

One issue for the banks that perform less well on trust is that they aren't filling an particular niche. As a result, their customers generally may stick with them out of habit or because they're generally reliable, but they don't excel on any aspect of banking.

Trust in Savings Account Providers

As with current accounts, there is substantial variation between savings accounts providers when it comes to trust. First Direct, National Savings & Investments (NS&I) and Monzo have close to 60% of their customers saying they 'strongly agree' that they trust their provider, while for TSB, Virgin Money and Post Office that figure is closer to 30%.

What drives trust in savings account providers?

Unlike with current accounts, customers who have a positive opinion of a provider's website and app don't necessarily trust their savings provider more. Some of the most trusted providers, such as Monzo and First Direct, are also highly rated for their apps, but there are other providers that score well on trust, such as Coventry Building Society and the Co-operative Bank, whose digital services aren't at the top of the table.

One of the most important, if not the most important, product features of savings accounts is the interest rate. When we look at the data on trust, however, we find that the interest rate offered is not closely connected to customer trust, as the figure below shows. (The interest rate used for this analysis is the rate offered on instant access accounts on 29 August 2023 - the polling was completed on 30 August 2023).

There is a correlation, however, between interest rates and customer satisfaction. This means that if an account offers sub-par interest rates, customers are less likely to be happy but they won't necessarily lose trust in their provider. This has a certain logic: I might not be happy with my bank if their interest rates aren't competitive, but I could still trust them to keep my money safe and let me easily access it when I need it.

What, then, does drive trust in savings accounts providers? The figure below shows that in savings, as in current accounts, different highly-trusted providers have carved out different niches for themselves:

• Monzo has highly rated digital services.

• First Direct, Co-operative Bank and Nationwide have built up strong reputations for customer service.

• Principality Building Society, Nationwide and Yorkshire Building Society have customers that appreciate their branch network.

• The Co-operative Bank is seen as much more "green" than other large banks and building societies.

What next for trust in banking?

The FCA's Consumer Duty came into force earlier in 2023. Providers have already done much work to improve customer outcomes in line with the requirements of the Duty. There remains a question, though, over whether savings account providers are doing all they can to pass on interest rate rises to their customers. Similarly, the low rates of interest offered on current account balances are another area where banks are arguably not offering 'fair value'.

Through our Trust in Banking Index, we will track whether customer trust improves in the wake of the Consumer Duty and - if it does - what is behind it.

You can access the full data behind the index on the Fairer Finance Insight Portal. For information on this, or for any questions about the index, contact corporate@fairerfinance.com