J.D. Power: Big Banks Gain in Customer Satisfaction; Mid-Size Banks Decline

J.D. Power, New York, said larger banks made “significant” gains in customer satisfaction measures in the past year, while mid-size and regional bank satisfaction leveled off.

The company’s annual U.S. Retail Banking Satisfaction Study, which measures customer satisfaction along six factors, said big banks continued to make improvements in technology and engaged in better personal interactions, particularly with the Millennial generation, to drive “historic performance improvement.”

J.D. Power said satisfaction with big banks rosefor the sixth consecutive year, driven by a combination of improved digital offerings, more engaged personal interactions and stronger connections with growth segments of the population, while satisfaction with midsize banks dropped for the first time since 2010.

More than 75,000 customers evaluated various aspects of their banking experience for the study, on the following factors: account information; channel activities; facility; fees; problem resolution; and product offerings. Channel activities include six subfactors: ATM; branch; call center; IVR; mobile; and website. Satisfaction is measured on a 1,000-point scale.

“Based on their current trajectory, the country’s largest retail banking institutions are expected to achieve a substantial lead in overall customer satisfaction vs. midsize and regional banks by 2020,” said Jim Miller, senior director of banking with J.D. Power. “This trend puts midsize banks most at risk. Regulatory costs have made it difficult for them to invest in strategies to compete with larger rivals, and unless they take proactive steps to change course, we expect this to result in consolidation in the midsize bank marketplace.”

Key findings of the 2016 study:

Big Banks Close the Customer Satisfaction Gap: Overall satisfaction in the retail banking industry improves to 793 from 790 in 2015. Satisfaction with big banks improved by six points to 793 from 2015, compared to 797 for Midsize banks (down five points) and 790 for regional banks, remaining flat. Big bank segment satisfaction improved by 56 index points, nearly closing a 34-point gap with midsize banks from 2010.

Getting Tech Right: Big banks scored highest in mobile (851), ATM (837) and online satisfaction (838). Mobile banking scored 27 points higher among customers who use mobile banking than among those who do not. Among mobile users who are satisfied with the mobile offering (mobile satisfaction score of 800 and above) the gap in satisfaction is 197 index points higher than among dissatisfied mobile users, those scoring below 800 index points (868 vs. 671, respectively).

Winning in Growth Segments: Big banks have been most successful at acquiring and satisfying Millennials, the fastest-growing customer segment. Millennials represent the biggest growth potential for retail banks, but also pose much higher risk of attrition.

Evolving the Branch Model: While the overall number of bank branches in the United States declined, brick and mortar branches are still a key channel for servicing customers in those moments of truth (e.g., resolving problems and dealing with more complex transactions). This is evident in user preference patterns, with the percentage of customers opening accounts online steadily increasing but the branch continually performing higher in terms of enhancing product understanding and reducing future problems.

“While customer satisfaction with big, midsize and rRegional banks falls within a tight 7-point range, establishing customer service tools for competitive differentiation is key to a successful path forward,” said Paul McAdam, senior director of banking services with J.D. Power. “We clearly see that the customer satisfaction leaders in retail banking excel by hitting the sweet spot of providing a great digital experience backed by personal service.”

The study measures customer satisfaction with banks in 11 regions. Study results by region are:

California Region: U.S. Bank (808)
Florida Region: TD Bank (837)
Mid-Atlantic Region: Northwest Savings Bank (819)
Midwest Region: UMB Bank (821)
New England Region: Bangor Savings Bank (842)
North Central Region: Huntington National Bank (830)
Northwest Region: U.S. Bank (798)
South Central Region: Trustmark National Bank (855)
Southeast Region: United Community Bank (841)
Southwest Region: Arvest Bank (843)
Texas Region: Frost Bank (862)

The study was fielded quarterly from April 2015 to February 2016.