November 29, 2022

Trust is Priced with Very Slim Margins

According to various media reports, the seven major banking institutions which own Zelle, the peer-to-peer payment transfer network, are preparing an internal rule change that would require banks who participate in the network to compensate Zelle users who fall prey to certain fraud-related transfers.

This change comes after numerous customer complaints, followed by regulatory inquiries and Congressional hearings, regarding Zelle’s policy on fraud and scam claims. The current policy is that the customer bears the full cost of any such transaction.

Last year, Zelle processed 1.8 billion transfers totaling $490 billion. Fraud and scam claims, according to Zelle operator Early Warning Systems, only make up 0.1% of those 1.8 billion transfers.

While 1.8 million fraud-related transfers is no small number, the scale of the problem seems to be much smaller than other banking risks which must be managed. The typical reserve ratio banks hold for loan losses is generally between 1% to 2%, and some banks hold even higher loan loss reserves.

I’ll let the bankers knowledgeable with the issue correct my assumption that the scale of the problem is manageable from a financial point of view. The bigger problem, though, lies with intangible losses, such as reluctance by some customers to use the service, regulatory and lawmaker inquiries, and a potential decline in overall customer trust in the network. It’s these intangible losses which seem to be prompting Zelle’s ownership to make changes.

For those of us who are solo or small firm professional services providers, the lesson is clear:  trust is priced on very slim margins. Trust is a critically vital currency in our everyday work. It doesn’t take a major hit to your trust factor to spread in a variety of unpredictable directions, all of which are damaging. The only question is to what degree.

Here’s the positive side of it:  trust may be the one intangible in which most clients place the highest value. That’s marvelous news if you, as a services provider, are constantly engaged in trust building actions and activities for your clients and prospects. If that’s your constant focus, then you are, by definition, creating value.

 

 

Image created using Craiyon (Formerly DALL-E Mini)

(This blog post was also posted on LinkedIn.)

©Ray Business Advisors, LLC and John Ray

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About me: I help solo or small professional services firm owners with the confidence and positioning necessary to improve their pricing and change the trajectory of not only their business but their life.

I have a podcast called The Price and Value Journey, which features interviews with industry leaders and audio versions of my blog posts. You can find the podcast on your favorite podcast app.

I also have a book coming out in 2023:  The Price and Value Journey: Raise Your Confidence, Your Value, and Your Prices to Grow Your Business Using The Generosity Mindset.

For more information, go to PriceValueJourney.com