For a fourth consecutive year, customer loyalty and perceptions of brand image among retail banking customers continue to decline, while satisfaction has leveled off, according to the recent J.D. Power and Associates 2010 U.S. Retail Banking Satisfaction Study. Now in its fifth year, the study finds that overall satisfaction of retail banking customers averages 748 on 1,000-point scale in 2010—a slight decrease from 749 in 2009. The brand image of banks has also continued to decline, with customers perceiving banks as being more profit-driven than customer-driven, compared with 2009. In addition, the percentage of customers who say they “definitely will not” switch banks during the next 12 months has decreased significantly during the past three years to 34 percent in 2010, compared with 46 percent three years ago in the 2007 study.
The gap in loyalty intent between customers of larger and smaller banks is considerable, with 41 percent of customers at smaller banks who say they “definitely will not” switch, compared with 32 percent at larger banks. Higher customer satisfaction with in-person service and attention is an important contributor to increased loyalty at smaller banks. Acquisition rates are also improving at smaller banks, with new customers accounting for eight percent of the customer base, compared with an industry average of six percent.
Poor customer service—the most common reason given for switching banks—is cited by 37 percent of customers who changed their primary bank in 2010. Performing simple service acts, such as such as greeting customers as they enter the branch, offering additional assistance, and thanking them for their business, may increase overall satisfaction by nearly 50 index points, yet less than 60 percent of customers report experiencing them.
“As retail banking customers become considerably less loyal, banks need to focus on getting the fundamentals right,” said Michael Beird, director of banking at J.D. Power and Associates. “Banks that get back to the basics—such as maintaining a clean branch and greeting customers upon entering—may help to alleviate some of the distress customers are experiencing and increase their overall satisfaction.”
Fees continue to have a major impact on customer loyalty, as 29 percent of customers who switched banks in 2010 cite high fees for products or services as their reason for switching.
“While fees have a significant impact on customer satisfaction, banks may mitigate this effect by giving customers choices,” said Beird. “Customers tend to be considerably less dissatisfied when they have different overdraft options, such as the ability to transfer funds from a savings account or receive a balance alert. Proactive communication may also help to lessen the negative impact of fees, as satisfaction is more than 100 points higher among customers who are aware of changes in fees ahead of time, compared with customers who are taken by surprise.”
The study also finds that customers may be highly satisfied even when they are charged bank fees, provided that they perceive they are receiving sufficient value in exchange. When satisfaction with fees is above average, customer’s ratings for branch access and appearance, promptness of being served, and the bank’s website navigation and range of services are also higher than average.
Use of remote banking options is becoming increasingly common, with 51 percent of customers in 2010 indicating a preference for online banking, an increase from 45 percent in 2008. In addition, seven percent of customers report using a mobile device to execute such transactions as checking balances, transferring funds and paying bills.
The study analyzes customer satisfaction with the retail banking experience based on six factors: account activities; account information; facility; fees; problem resolution; and product offerings. Study results by region are:
California: Bank of the West ranks highest in the region with a score of 782, and performs particularly well in the account activities factor. Union Bank of California (771) and Wells Fargo (761) follow in the regional rankings.
Florida: BankAtlantic ranks highest in Florida with a score of 792 and performs well in the facility, product offerings and account information factors. SunTrust Bank (788) and Regions Bank (786) follow in the rankings.
Mid-Atlantic Region: With a score of 808, Northwest Savings Bank ranks highest in the region and performs well in fees. Susquehanna Bank follows in the rankings with 806, and First National Bank of Pennsylvania ranks third with 784.
Midwest Region: Commerce Bank ranks highest with a score of 809, and performs particularly well in five factors: account information, account activities, facility, fees and product offerings. First Midwest Bank (783) and First Bank (773) follow in the regional rankings.
New England Region: Eastern Bank ranks highest in the region with a score of 787, and performs well in the account information, account activities and fees factors. People’s United Bank (People’s Bank) follows with 771 and Webster Bank ranks third with 761.
North Central Region: With a score of 800, Flagstar Bank ranks highest in the region and performs well in five factors: account information, account activities, facility, fees and product offerings. Independent Bank (796) and Wells Fargo (775) follow in the regional rankings.
Northwest Region: Sterling Savings Bank ranks highest with a score of 767, performing particularly well in the account activities and fees factors. Wells Fargo (757) and KeyBank (747) follow in the rankings.
South Central Region: Arvest Bank ranks highest in the region with a score of 805 and performs well in the facility and fees factors. Whitney National Bank follows in the rankings with 795 and Hancock Bank ranks third with 792.
Southeast Region: United Community Bank ranks highest with a score of 815, performing particularly well in the account activity, facility and fees factors. First Citizens (Bancshares) follows with 800, while Regions Bank ranks third (790).
Southwest Region: With a score of 835, Arvest Bank ranks highest in the region and performs well in the facility, fees, product offerings and account information factors. FirstBank (796) and Nevada State Bank (788) follow in the regional rankings.
Texas: Frost National Bank ranks highest with a score of 829 and performs well in the account activities, account information, fees and product offerings factors. Woodforest National Bank (800) and Capital One (787) follow in the rankings.
The 2010 U.S. Retail Banking Satisfaction Study is based on responses from nearly 48,000 respondents regarding their experiences with their banking provider. The study was fielded in January and February 2010.
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