“Trust and digitization in financial services”

Financial service providers must continue to provide personal

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  • Branch closures and sales force cuts represent a clear shift away from clients
  • Study shows that personal contact must remain rooted in the strategy as a key component for building trust
  • In comparison with established companies, start-ups have a disadvantage that they can only reduce by adding personal contact
  • Combination of customized digital access with personal contact points is becoming a major competitive advantage

ZURICH, 11 MAY 2017 – For some time, banks, insurance companies and asset managers in Switzerland have found themselves caught between cost pressures and the demands of investing in digitization. They are closing branches and restructuring sales force organizations. They face new market participants who are often one step ahead in terms of client focus. The sector continues to suffer from the great loss of trust experienced during the financial crisis. Against this backdrop, EY and the University of St. Gallen (HSG) have conducted an experimental study on the building of trust for financial service providers, in light of the increased use of digital channels. The study shows that personal client contact continues to play a key role in building clients’ trust in Switzerland.

According to the model developed by EY and HSG, the main factors in promoting trust in digital client processes in financial services are the client’s perception of a company’s professionalism and transparency, low access barriers as well as the establishment of a relationship with the client. Companies that offer the option of personal contact benefit from a level of trust up to 34% higher than companies that do not offer this option. This is particularly true in the utilization phase, i.e., following the purchase of a financial service, when the degree of trust built through personal contact is twice as high as in the purchase phase. Conversely, it was observed that up to 22% of trust is lost when established financial service providers reduce personal contact in the utilization phase and operate on a “digital only” basis, according to a cautionary finding from the study conducted by EY and HSG.

“Digitization can lead to a crisis in confidence, as many activities are shifted to clients and contact with them is lost,” says Bernhard Schneider, Senior Manager, Insurance Strategy and Customer at EY Switzerland. “The study is the first to show just how much client trust suffers when personal contact is neglected. This can lead to a greater loss of clients if they are presented with competitive alternatives. Established financial service providers must prevent this by consolidating client loyalty through personal contact that promotes trust,” says Schneider.

There are many ways to also develop trust through digital interactions. The study shows, among other things, that clients prioritize the relevance of content. “In order to offer relevant content, we recommend that banks, insurance companies and asset managers combine the targeted customization of their online information and client portals for each individual client, for example by means of dynamic website optimization. The next step is to directly include the information thus obtained in personal conversations with the advisor. This allows advisors to present targeted offerings and align the discussion with the client’s activities, leading to real added value for the client,” explains Schneider.

Personal contact does not work for all client segments
The wide range of client characteristics have a very strong impact on perceived trustworthiness and on the strategies used to create and maintain client trust, particularly in the purchase phase. Personal contact in the purchase phase does not necessarily confer an advantage with the following target groups. These groups are more appealing to competitors with a purely digital sales strategy, such as start-ups, because the sales channels of established companies, which traditionally feature personal contact, do not have a competitive advantage (see table 1):

  • Clients who generally have a high level of trust in financial services (15%)
  • Clients with little interest in financial services (20%)
  • Clients with few assets (26%)
  • Clients with a high level of education (43%)
  • Men (50%)

EY - Table 1

In the utilization phase, however, the study reveals that – irrespective of client characteristics – trust is most effectively established through a mix of digital channels and the offer of personal interaction, for example via a client advisor in a branch office.

“We have created a solid trust-building model for the financial sector, based on the interplay of the purchase process phase, communication channel, company type and client characteristics involved. Analysis of the results shows that high levels of trust can only be achieved by combining digital and personal elements,” explains Prof. Dr. Marcus Schögel, study leader at HSG.

Benefit of the doubt vs. client benefits
Traditional companies, thanks to their existing name recognition and reputation, are given the benefit of the doubt in comparison with start-ups. They are perceived as more professional and transparent. This was confirmed by the study, in which established companies enjoyed up to 9% more trust than start-ups. However, start-ups can significantly reduce this disadvantage by pursuing a hybrid client contact strategy, encompassing both online options and personal, offline interaction.

Meanwhile, the benefit of the doubt enjoyed by established financial service providers does not apply for all clients. Certain client groups see no difference between “traditional companies” and “new competitors” when it comes to trustworthiness. Client groups that trust start-ups as much as established financial service providers are (see table 2):

  • Clients with little interest in financial services (20%)
  • Young clients (21%)
  • Clients with few assets (26%)
  • Clients with a high level of education (43%)
  • Men (50%)

EY - Table 2

In general, start-ups have an especially good chance when their innovation offers clients true added value, does not merely imitate existing services, and allows for personal contact in the post-purchase phase.

This study considers and analyzes the current needs of Swiss financial services clients. It remains unclear as to what extent client behavior might change in light of future technological developments. In this context, the following question will play a key role in determining the future strategies of banks, insurance companies and asset managers: will future generations continue to value personal contact, or can it be fully replaced by digital interactions?


About the study:

The study “Trust and digitization in financial services”, conducted by EY and the University of St. Gallen (HSG), is the first study into the behavior of financial services clients in how they establish trust within the digital world. It investigates the highest degree of trust that can be achieved depending on the company type (established versus start-up), purchase process phase (pre-purchase or post-purchase phase) and form of communication (digital or face-to-face). It provides recommendations for financial service providers on how trust and client relations can continue to be operationalized and safeguarded in the digital age. Extensive research and 12 qualitative expert interviews formed the scientific basis on which the scientific trust-establishment model for financial service providers was developed. A quantitative online survey of a representative Swiss sample, consisting of 404 people, served to validate the model and gain further key insights into the Swiss financial services market. Link to the study: http://www.ey.com/ch/fs-heartbeat

About EY

EY* is one of Switzerland’s largest audit and advisory firms. EY employs about 2,700 people across 11 offices in Switzerland and Liechtenstein, and generated revenue of approx. CHF 661 million in the 2015/2016 financial year. Together with the 231,000 employees of the global EY organization, EY serves clients all over the world. EY offers an extensive portfolio of services to large as well as small and medium-sized businesses: integrated transformation advisory from strategy to IT architecture, assurance, transaction, tax, legal and people advisory services. Our highly trained staff, strong teams and local base in a globally integrated organization allow us to overcome the challenges our clients face. We are committed to “Building a better working world” – for our people, for our clients and for our communities.

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*The name EY refers here to Ernst & Young Ltd, the Swiss member firm of Ernst & Young Global Limited (EYG), a UK company limited by guarantee. Each EYG member firm is a separate legal entity and has no liability for another such entity’s acts or omissions.