COSTA MESA, Calif.–Retail banks face a major customer satisfaction challenge as consumers increasingly switch to digital-only engagement, according to a new report from J.D. Power.
“Banks have been confronting a difficult paradox for the last several years,” stated J.D. Power. “The most satisfied retail banking customers use both branch and digital services to conduct their personal banking, while the least satisfied are those who have a digital-only relationship with their bank and do not use branches.”
The COVID-19 pandemic has accelerated the move to digital service channels as access to in-person branches has been limited, which is creating an “important test,” said J.D. Power.
According to the newly released J.D. Power 2020 U.S. Retail Banking Satisfaction Study, 52% of retail bank customers classified as branch dependent before the COVID-19 pandemic, and successfully transitioning them to digital—without compromising customer experience—will be critical in the weeks and months ahead.
“With fewer customers visiting branches, it will be important for retail banks to replace the in-person service they would have provided with personalized services delivered instead through digital channels,” said Paul McAdam, senior director, banking intelligence at J.D. Power, in a statement. “Given the technology available to banks, customer pain points with digital should be easy to address. Let’s keep in mind that digital retail banking was introduced 25 years ago. Executing basic, user-friendly functionality, providing a full range of services and offering easy ways to pay and move money are areas where banks could improve their digital offerings.”
The Key Findings
According to J.D. Power, key findings of its 2020 study include:
- Pre-pandemic, branches still played major role. Prior to the COVID-19 pandemic, 52% of retail bank customers were classified as branch dependent, meaning they either used the branch exclusively (10% of customers) or used a combination of branch visits, online and mobile banking service (42% of customers) during the past three months, J.D. Power reported.
“Branch-dependent customers visit a branch an average of 1.5 times per month. Following 25 years of bank investment in providing and upgrading digital offerings and customers’ increased adoption of them, 30% of bank customers now do their banking in a digital-only manner and do not use branches,” JD. Power said.
- Digital-only customers have lowest levels of satisfaction. Overall customer satisfaction with retail banks tends to decline as customers transition away from the branch and to digital-only banking relationships, noted J.D. Power. The overall satisfaction score among branch-dependent bank customers is 824 (on a 1,000-point scale), which is 23 points higher than the score among digital-only customers. That satisfaction gap is widest (31 points) among members of Generation Y, the report states.
- Big banks lead midsize and regional banks on digital engagement. The Big Six banks currently have a jump on regional and midsize banks to build digital engagement, according to J.D. Power. Prior to the pandemic, 49% of big bank customers had high levels of digital engagement, compared with 41% of regional bank customers and 36% of midsize bank customers.
- P2P payment integration emerges as wild card for bank customer satisfaction. Satisfaction is significantly higher among customers who have linked their bank accounts to digital payment services (e.g., Zelle, Apple Pay, PayPal, Venmo) than among those who have not. Among P2P (person to person) payment providers, direct integration with Zelle generates the highest boost in bank customer satisfaction.
Rankings by Region
J.D. Power noted the study measures customer satisfaction with banks in 11 geographic regions. Highest-ranking banks and scores, by region, are as follows:
California Region: Chase (825)
Florida Region: Chase (851)
Mid-Atlantic Region: S&T Bank (871)
Midwest Region: First National Bank of Omaha (847)
New England Region: Bangor Savings Bank (863)
North Central Region: City National Bank (WV) (857)
Northwest Region: Columbia Bank (837)
South Central Region: Arvest Bank (863)
Southeast Region: United Community Bank (862)
Southwest Region: Arvest Bank (851)
Texas Region: Frost Bank (863)
How Data was Compiled
J.D. Power said the U.S. Retail Banking Satisfaction Study, now in its 15th year, measures satisfaction in six factors (listed in alphabetical order): account opening; communication and advice; channel activities; convenience; problem resolution; and products and fees. Channel activities include seven subfactors (listed in alphabetical order): ATM; assisted online; branch; call center; IVR; mobile; and website.
The study is based on responses from 91,950 retail banking customers of 182 of the largest banks in the United States regarding their experiences with their retail bank. It was fielded from April 2019 through February 2020. Big banks are defined as banks with more than $250 billion in domestic deposits; regional banks are those with $55 billion-$250 billion in domestic deposits; and midsize banks are those with less than $55 billion in domestic deposits.