WESTLAKE VILLGE, Calif.–Branchless financial institutions are showing some “signs of vulnerability,” according to a new analysis released by J.D. Power.
While noting that direct banks continue to outperform traditional retail banks in overall customer satisfaction, J.D. Power’s 2018 U.S. Direct Banking Satisfaction Study said direct banks have lost ground to traditional retail banks in terms of customer understanding and mobile experience.
Key performance metrics—providing tailored information to meet customer needs, understanding product features and understanding fee structures—have declined year over year.
Among the findings:
- Mobile poses a challenge: More than three-fourths (77%) of direct bank customers indicate using the mobile channel (an increase of five percentage points from last year), and customer satisfaction with the mobile channel has declined eight points from last year, making it the channel with the narrowest performance lead compared to retail banks, J.D. Power said. The performance gap in mobile customer satisfaction between direct banks and traditional retail banks is just 14 points.
- Mobile banking satisfaction is 863 out of 1000, 57 points higher than for traditional banks, but they are still considered something of an afterthought. Just 43% of direct bank customers consider their direct bank to be their primary bank.
- If those banks want to grow beyond their 10% customer base and evolve from a secondary to a primary bank relationship, J.D. Power notes, they need to focus on cross-channel consistency and ramp up their digital capabilities.
- A majority still treat direct banks as a secondary banking provider: Just 43% of direct bank customers consider their direct bank to be their primary bank. Overall satisfaction among that 43% is 873, which is 18 points higher than among customers who consider their direct bank to be a secondary banking relationship. Primary banking customers are more engaged, making an average of 41 contacts with their bank vs. 21 contacts for secondary customers.
- Social media is a key marketing channel for direct banks: Among direct bank customers who opened a new product in the past 12 months, 38% say they were influenced by social media to open the new product. Approximately 50% of Gen Y, Gen Z and mass affluent customers cite social media as being influential.