Midsize banks (those with deposits between $2 billion and $33 billion) have traditionally been the leaders of customer satisfaction in the banking industry, but technology has advanced to the point where big banks and regional banks are closing the gap. These larger institutions—once the most vocally criticized by consumers during the recession—are making considerable improvements in personal interactions with customers, minimizing the occurrence of problems and strengthening brand perceptions.
The progress in these areas is clearly making a difference as banks have rebounded from low, post-recession customer satisfaction to an all-time high score of 790 (on a 1,000-point scale) in the J.D. Power 2015 U.S. Retail Banking Satisfaction StudySM.
Mobile and Digital Technology
Gains in overall customer satisfaction across big and regional bank segments have been driven by training employees to educate customers on the various transaction features that are available via mobile and digital channels. Both big banks and regional banks have gotten a jump on investing in this technology and have expanded the resulting advantages, giving them an important arena where they have consistently outperformed midsize banks over the last five years.
Midsize banks continue to lag behind in customer awareness of website features such as person-to-person electronic payments, personal financial management tools, online chat capabilities, and mobile functionality like check deposits and P2P payments. One policy in particular—charging customers for making mobile deposits—is being administered by midsize banks as opposed to big banks and regional banks. This policy can severely hinder adoption and usage of this key service that is driving satisfaction among consumers.
Midsize banks also trail in customer awareness of advanced ATM features, such as envelope-free deposits, itemized cash deposit receipts and image-enabled receipts. Midsize banks are also less likely than big banks and regional banks to offer e-receipts, multiple bill denominations and other newer ATM technologies.
Personal Customer Interactions
Midsize banks have long held a considerable advantage in personal interactions with customers, which has helped them maintain higher scores than larger banks in overall customer satisfaction; however, that advantage is now eroding. More big banks have started greeting customers by name and thanking them when they come to a branch. This brings the big bank customer experience at the branch closer to that of customers of midsize banks.
Across the banking industry, overall satisfaction drops significantly when customers experience any sort of problem, which leads to lower share of deposits and lower customer retention rates. While midsize banks consistently excel at preventing problems, big banks and regional banks are steadily gaining traction—in fact, these larger institutions have lowered their incidence rate by more than 25 percent since 2013.
Can Midsize Banks Keep Pace?
Midsize banks clearly face a challenge from big and regional banks, and may suffer the same fate as independent retailers in other industries when larger retailers enter the market. There are several actions midsize banks can take to avoid that path, such as:
- Acquiring the essential competitive intelligence found in third-party research to complement the bank’s own research;
- Using this comprehensive collection of research to assess the bank’s current position compared to the competition and industry average;
- Putting plans in place to improve the bank’s position in the areas that matter most to current and potential customers;
- Continually measure customer satisfaction and manage business practices according to those metrics.
With many larger competitors already conducting these practices, midsize banks must take similar actions to avoid becoming dethroned as the leaders in retail banking customer satisfaction.
Jim Miller is the Director of Banking Services at J.D. Power.