May 21, 2019

Consumers Are Standing By Their Banks: Here's Why

Excerpt: A new report from J.D. Power shows that customers are sticking with their bricks and mortar banks, despite the prevalence of mobile and new technology. 

According to a recent report, customers are staying with their banks and are not likely to make a switch.

Consumers might appreciate the idea of mobile and online banking, but they're not motivated enough to make a switch to another financial institution — including FinTechs — to handle their banking.

According to a recent report by J.D. Power, a mere 4 percent of consumers switched banks in 2018, the lowest level recorded since the firm started following this data a decade ago. The report also found that 10 of the biggest retail banks expanded their share of deposits from 39 to 48 percent since 2009 while also growing their branch offices from 26 to 31 percent.

J.D. Power polled about 84,000 consumers of the 200 biggest banks in the country and measured consumers' satisfaction with opening a bank account, communication, problem-solving, convenience, and products and services.

Why are customers sticking with their banks? Over the past few years, banks have been putting in a lot of effort to make banking as convenient as possible. Big banks are using their clout to keep up with mobile and online banking platforms and branch out to cover large areas. Such efforts have upped the satisfaction level among customers, prompting them to stay put rather than going elsewhere for their banking.

Somewhat surprisingly, the millennial demographic is the group that makes up a sizeable chunk of the market share for big banks. According to the report by J.D. Power, millennials are more likely to open a bank account with a large bank with at least $55 billion of assets and stick around for the long haul. Consumers in this age bracket appreciate the types of products and services offered by bigger banks compared to smaller ones.

In many regions, community banks ranked highest among consumers, and private financial institutions also ranked well, showing that many consumers still like to bank with local institutions.

In other areas, larger banks scored the highest in customer satisfaction. JPMorgan Chase, for instance, took the top spot in customer satisfaction in places like Florida and California, with TD Bank taking the number one spot in the Southeast.

Customers helped JPMorgan Chase rank number one in customer satisfaction in California and Florida in the recent J.D. Power survey. 

But while rates of satisfaction might be high among consumers, trust level is still lagging. Improved products and services have certainly contributed to increased convenience, but reputations still aren't where they could be.

Many consumers still hold the notion that banks are more keen on looking out for their own best interests instead of their customers' interests. Further, consumers are still not entirely satisfied with how efficient banks are when it comes to resolving issues, according to the report.

While the banking industry may have made improvements in convenience, strengthening customer relationships is still an area that may require more attention.

However, customers are still not leaving the banking system or their current bank. Big banks and community banks still serve the purpose of financial service and convenience.

Not only do banks need to retain their customers, but they also must ensure that they have a robust loan portfolio. Garnet Capital can help banks maintain strong loan portfolios by identifying and selling off underperforming assets and replacing them with stronger ones.

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