Retail Banking Study Shows Decline in Customer Loyalty

“Customer Loyalty and Brand Image Decline Among Retail Banking Customers For a Fourth Consecutive Year.”  While that headline of the JD Power and Associates Retail Banking Satisfaction Study should hardly come as a surprise, one finding that may be more troublesome to bank executives is the percent of consumers who may consider switching banks.

Now in its fifth year, the J.D. Power study analyzed customers’ satisfaction with their retail banking experiences based on the categories of account activities, account information, facilities, fees, problem resolution and product offering.

Three key findings cited in the study:

• 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 to 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.

In other words, more people may intend to leave their current bank, especially if they encounter poor customer service, which is the most common reason given for switching banks (cited by 37 percent of customers who changed their primary bank in 2010, according to study findings.)

Toss on technology making it easier to move money via online switch kits, online account opening and funding, plus a dash of social media to stir up consumer sentiment (such as Move Your Money ), and you have a perfect storm brewing that could signal real consumer action to switch banks.

Michael Beird, J.D. Power banking director, said in the survey release, “As retail banking customers become considerably less loyal, banks need to focus on getting the fundamentals right. 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.”

As banks slug it out to grow core deposits, retain customers and repair tarnished images, the last thing banks want to see is wallet-share going across the street to a competitor. If this survey is any indication, banks have their work cut out for them. 

And it’s going to take a lot more than a sparkling clean lobby or a smiling banker to increase customer satisfaction.