What do other crises tell us about what may happen to Tesco Bank’s brand health?

November 09, 2016, 4:00 PM GMT+0

NatWest and TalkTalk have suffered reputational hits in recent years and they point to problems for Tesco Bank

Earlier this week, Tesco Bank announced it had suffered a security breach that led to customers losing money through fraudulent activity. While it will be a while before we can fully assess the impact on the bank’s own image, what do similar technology fails for other brands – as seen through YouGov BrandIndex data – tell us about what could be in store for the retail giant’s financial services arm?

The first thing to note is that the Tesco Bank case is unique. While other brands have suffered security breaches in recent years, the theft was of consumers’ data, not consumers’ money. This means that while the perception hit experienced by other brands is instructive it is not exact.

Last year, TalkTalk suffered a number of hacks where customers’ personal information was compromised. When it announced in October it had been hit by a data breach its overall brand health (as measured by the Index score) was at -3.0. It did not get back to its October level until August 2016.

However, there is a difference between a technology provider such as TalkTalk being hit with a data breach and a bank suffering a crisis that affects account holders. NatWest suffered major technology issues in 2012 when a software upgrade went awry and customers were unable to access their accounts. The brand’s Index score was +3.5 on the day of the issue and it is still yet to recover, four years on.

In part this is due to the bank enduring a rolling wave of problems over the ensuing years, but it is also down to the distinct relationship people have with their banks. They trust them to both keep their funds safe and allow then to access their cash whenever they need to.

We will know soon how bad things are, but it is reasonable to expect Tesco Bank to fall by as much, if not more, than either NatWest or TalkTalk. While consumers get unnerved by both personal information being stolen and not being able to access funds, there is every chance that they will be even more disconcerted by their money being taken.

Another interesting thing to watch will be whether there is any contagion from this crisis to Tesco’s parent brand. After a difficult few years, it has been on the up recently and it could be a concern to the retailer’s brand managers should consumers not trust it with money.

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