There’s no doubt the U.S. banking industry is under fire. The recent spate of government bailouts, takeovers and closures has consumers across the nation anxious, wondering which bank might be next and, more importantly, if their own money is safe. Unfortunately for the banks, things aren’t getting any easier as consumers continue to voice their dissatisfaction. To make matters worse, customer commitment to retail banks continues to fade, driven primarily by declines in both satisfaction and brand image, according to a new study by J.D. Power and Associates. The biggest gripe among bank customers? Higher fees. In fact, one out of three customers who switched banks in the past 12 months did so because of increased fees. In particular, overdraft fees increased most on average, rising from $30 in 2008 to $35 in 2009.
The J.D. Power and Associates 2009 Retail Banking Satisfaction StudySM analyzes customer satisfaction with the retail banking experience across six factors:
- transactions;
- account statements;
- account initiation/product offerings;
- convenience;
- fees;
- problem resolution.
A retail bank is one whose primary customers are consumers and small businesses, accessed primarily through branches and ATMs, as opposed to commercial banks that primarily focus on larger businesses and corporate relationships. The study, now in its fourth year, finds that only 35 percent of customers are highly committed to their retail bank in 2009, compared with 37 percent in 2008 and 41 percent in 2007. This marks a two-year decline of 6 percentage points in customer commitment since the 2007 study. This trend is especially troubling to banks because, on average, highly committed customers use more products, give more referrals and are much less likely to switch to another bank compared with customers with lower commitment levels. “Customers reporting the lowest level of commitment in 2009 just so happen to be the most valuable banking customers, i.e., those customers with deposit balances that are 15 percent higher than average,” said Michael Beird, director of the banking practice at J.D. Power and Associates.
Other highlights from the 2009 Retail Banking Satisfaction Study include:
- Overall customer satisfaction with the retail banking experience has declined slightly, dropping from 737 points on a 1,000-point scale in 2008 to 734 in 2009.
- The decline in satisfaction is primarily driven by an increase in problems experienced among customers, particularly regarding issues with fees.
- Over the past 12 months, 15 percent of customers reported a problem with fees, which is up from 12 percent in 2007. As such, customers report lower satisfaction levels in the area of fees in 2009—dropping 19 points compared with 2008.
- Customer perceptions of banks—and the accompanying brand image—has declined for a third consecutive year. Low customer ratings in the areas of overall reputation, customer focus and personal service primarily drive the drop in brand image among banks.
- Despite the challenging financial market, some banks have achieved high commitment levels from more than 50 percent of their customers, which is well above the industry average of 35 percent.
- In addition, these banks exceed the industry average for key satisfaction measures, including convenience, fees and transactions. Customers of these banks also rate them particularly high in brand image when it comes to customer focus, personal service and financial stability.
