· Australian banks have an overall trust score of 52.8%, compared to China’s 77.0%
· ING is the nation’s most trusted bank and has the most loyal customers
· Technological advancement justifies Bendigo’s customer loyalty score of 68.2%
Brand Finance conducted research on bank brands in 22 markets to understand how customers’ opinions have changed in an era of major disruption to the industry. As global banks retreated after the Great Recession, the traditional banking model has been under threat from new competitors. The prevailing trends suggest fintechs and niche “challenger banks” are biting into banks’ profits and luring their customers away with quality service at lower prices. Traditional banks are not set up to be quick innovators. Instead, they compete for customers’ trust and our research indicates which banks are considered the most trustworthy.
The Australian banking sector has – according to Brand Finance’s market research – achieved an overall trust score of 52.8%. This is compared to a strong 77.0% overall score in China and 64.9% in the US. The banking industry in Australia has recently faced pressure from the government with the introduction of new regulatory measures, such as issuing an AU$6.2 billion levy, holding bank executives to heightened standards of behaviour, and requiring senior executives to defer a proportion of their pay.
Mark Crowe, Managing Director, Brand Finance Australia, commented: “Australian banks are recognising the need to change perceptions of the industry among different stakeholders. They are not only ready to work with the government but, in an attempt to mitigate the effects of a bruised reputation, are also reaching out to customers, as the nation’s four largest banks have now lifted the cash withdrawal charge”.
ING stands out from among its peers, coming out on top as the nation’s most trusted bank with a score of 71.0% among the overall population and an even more impressive 79.6% among its customers. The bank lifted its profit by 6% in 2015 as a result of an increase in customer deposits and strong lifts in mortgages. Its total income rose by 3%. Furthermore, customers identifying ING as their main bank (i.e. have at least two products with the bank) increased 60% to over 200,000, reinforcing the high customer loyalty score of 70.4%, according to Brand Finance’s study.
Bendigo Bank is the second most trusted Australian bank with a score of 67.5%. The bank reported an AU$209 million post-tax profit for the second half of 2016, pointing to lending across retail and partner channels as key growth areas. Recently, Bendigo began offering Samsung Pay as a service for its customers, providing greater flexibility and choice. Its willingness to adopt and evolve with the changing technological world to aid customer usability renders it deserving of its customer loyalty score of 68.2%.
Note to Editors
Brand Finance researched 19,000 people in 22 markets. We asked the respondents to state which bank they were a customer of and whether they were likely to switch to a competing bank brand by selecting Might/Very Likely or Might Not/Very Unlikely. Bank brands with the highest proportion of customers “very likely” to switch are those with the least loyal customers. Whereas, others can boast a loyal customer base if the respondents were, in majority, “very unlikely” to switch.
We asked the respondents separately to state if they considered particular bank brands to be trustworthy. The samples were randomly selected and consisted on average of over 850 respondents representative of each market. The data was gathered with the help of online questionnaires and completed in November 2016, ahead of the release of the Brand Finance Banking 500 in February 2017.
Brand Finance is the world’s leading brand valuation consultancy. Bridging the gap between marketing and finance, Brand Finance evaluates the strength of brands and quantifies their financial value to help organisations of all kinds make strategic decisions.
Headquartered in London, Brand Finance has offices in over 20 countries, offering services on all continents. Every year, Brand Finance conducts more than 5,000 brand valuations, supported by original market research, and publishes nearly 100 reports which rank brands across all sectors and countries.
Brand Finance is a regulated accountancy firm, leading the standardisation of the brand valuation industry. Brand Finance was the first to be certified by independent auditors as compliant with both ISO 10668 and ISO 20671, and has received the official endorsement of the Marketing Accountability Standards Board (MASB) in the United States.
Brand is defined as a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos, and designs, intended to identify goods, services, or entities, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits.
Brand strength is the efficacy of a brand’s performance on intangible measures relative to its competitors. Brand Finance evaluates brand strength in a process compliant with ISO 20671, looking at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance. The data used is derived from Brand Finance’s proprietary market research programme and from publicly available sources.
Each brand is assigned a Brand Strength Index (BSI) score out of 100, which feeds into the brand value calculation. Based on the score, each brand is assigned a corresponding Brand Rating up to AAA+ in a format similar to a credit rating.
Brand Finance calculates the values of brands in its rankings using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in ISO 10668. It involves estimating the likely future revenues that are attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a brand owner would achieve by licensing the brand in the open market.
The steps in this process are as follows:
1 Calculate brand strength using a balanced scorecard of metrics assessing Marketing Investment, Stakeholder Equity, and Business Performance. Brand strength is expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.
2 Determine royalty range for each industry, reflecting the importance of brand to purchasing decisions. In luxury, the maximum percentage is high, while in extractive industry, where goods are often commoditised, it is lower. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database.
3 Calculate royalty rate. The BSI score is applied to the royalty range to arrive at a royalty rate. For example, if the royalty range in a sector is 0-5% and a brand has a BSI score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4%.
4 Determine brand-specific revenues by estimating a proportion of parent company revenues attributable to a brand.
5 Determine forecast revenues using a function of historic revenues, equity analyst forecasts, and economic growth rates.
6 Apply the royalty rate to the forecast revenues to derive brand revenues.
7 Discount post-tax brand revenues to a net present value which equals the brand value.
Brand Finance has produced this study with an independent and unbiased analysis. The values derived and opinions presented in this study are based on publicly available information and certain assumptions that Brand Finance used where such data was deficient or unclear. Brand Finance accepts no responsibility and will not be liable in the event that the publicly available information relied upon is subsequently found to be inaccurate. The opinions and financial analysis expressed in the study are not to be construed as providing investment or business advice. Brand Finance does not intend the study to be relied upon for any reason and excludes all liability to any body, government, or organisation.
The data presented in this study form part of Brand Finance's proprietary database, are provided for the benefit of the media, and are not to be used in part or in full for any commercial or technical purpose without written permission from Brand Finance.