Consumers: In Local Banks We Trust

Overall Confidence in Industry Plummets to 21%, Lowest in Decades

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YORK, Pa. ( -- Who has faith in big banks? Not many consumers these days, and that's driving people into the arms of their local institutions.

Only 21% of consumers polled are confident in U.S. banks, according to a survey taken in late September by Gallup. That marks an unprecedented drop from 40% in mid-July and is the lowest level of consumer confidence in banks in three decades. The 21% low easily beat the previous trough of 30% in October 1991, which occurred amid a major recession, the savings-and-loan crisis and lingering turmoil from the Gulf War.
Alan Siegel

Alan Siegel, chairman of branding firm Siegel & Gale

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Rocking that trust further are huge banks getting even bigger -- Bank of America swallowing Merrill Lynch, Chase merging with Washington Mutual and Citibank wrestling with Wells Fargo over Wachovia. "It looks like just another manifestation of greed and protecting themselves," said Alan Siegel, chairman of branding firm Siegel & Gale.

But not all banks are equally feeling the heat, and some local institutions are benefiting.

Unity National Bank in Miami County, Ohio, says it's getting new customers every day from Chase branches in town. "People are saying they're just not comfortable there," said Julie Monnin, Unity's marketing director. "We haven't changed anything about the way we do business. ... [But] people who before thought that maybe we were too stringent [with loan requirements] are now saying that they see why we are."

Unity is going out of its way to make sure consumers know it's solid. It has revamped its website to say so, adding a letter from the bank's president and an FAQ section. It even posted the home phone numbers of its president and marketing director. It also plans to put a newspaper insert in the local press. "We want [customers] to know we're doing fine," Ms. Monnin said.

Gallup's findings show that while fewer than 25% of consumers trust U.S. banks, a much healthier 66% said they had confidence in the local banks where they do business. Both numbers are down from mid-July, but while national bank confidence dropped from 40%, local bank confidence dropped from 80%.

"What people were saying is ... 'I don't trust those other bums, [but] I believe in the people at my individual institution,'" said Douglas Berlon, Gallup global practice leader for financial services. "A lot of local banks have positioned themselves as the caregiver -- we take care of you and your money," said Fritz Grutzner, president of branding-strategy firm Brandgarten. "And in times like this, it works to their benefit."

The key is to maintain that trust. "The whole concept of that moment of 'wow' between employees and customers at the local bank level means they have to manage it, believe in it, instill it and train around it. You have to make sure you're living at that local level," Mr. Berlon said.

Besting the big guys
The American Bankers Association, in which most members hold $125 million or less in assets, said many of its member banks are proactively reaching out to customers through private and public messaging. They're e-mailing customers, taking out ads in local papers and offering services that previously carried fees for free, an ABA spokeswoman said. She said one member bank has even hired an ad agency to create a video called "How Your Money Is Protected."

"Part of the issue has been that the general population doesn't make the distinction between Wall Street investment banks and neighborhood banks or deposit banks," she said, adding that only about 11 of the 8,500 banks in the U.S. have failed in the past year.

Local banks' open and direct communication to customers is the right strategy, Mr. Siegel said. "To be silent is a mistake. You have to be honest and transparent and communicate with customers."

That's what Canandaigua Bank has been doing since May, prompted by the housing crisis. Steve Martin, VP-public relations and marketing, said the upstate-New York bank has been proactively communicating a reassuring message to its customers. "Our objective was to be a leader in the market and tell our customers the facts and give them information," he said. "What we have received is an overwhelming response of deposits and loan requests."
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