Garnet Capital Advisors Blog

August 2, 2016

Growth and Opportunities in Retail Banking: Customer Satisfaction Is Key

The recent J.D. Power 2016 U.S. Retail Banking Customer Satisfaction Study indicates that future growth and opportunities in the banking business is very dependent on customer satisfaction - and that customer satisfaction, in turn, is very dependent on digital offerings, particularly mobile ones.

Digital channels are increasingly important to banking customer satisfaction.

Satisfaction with digital and mobile channels has been strong enough to keep the customer satisfaction levels of the biggest U.S. banks rising year over year. However, satisfaction with midsize banks fell year over year. It was the first decline in satisfaction for the midsize banks in six years.

Satisfaction with regional banks was flat with 2015 levels overall but dropped year over year in the online, mobile, and ATM categories.

The J.D. Power report is based on surveys of 20,000 banking consumers, who respond to the performance of retail banks. The institutions are classified as Big Banks ($180 billion or more in assets), Midsize Banks ($33 billion - $180 billion in assets), and Regional Banks ($2 billion-$33 billion in assets).

Digital Channels: Big Banks Win, Midsize at Risk
The big banks have been investing significantly in digital channels and customers are clearly indicating a positive response. The report showed that big banks had the highest scores in online satisfaction (839), mobile (858), and ATM (841) interactions.

Satisfaction with midsize banks not only fell for the first time since 2010, their future satisfaction looks in doubt as well. The study indicated that intended attrition for the midsize banks has doubled in the last 5 years. Midsize banks have the highest level of intended attrition among all the segments.

Jim Miller, senior director of banking at J.D. Power, observes "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. 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 Market Segments Boost the Big Banks
This is the first time that the six biggest U.S. banks (Bank of America, Citigroup, JPMorgan Chase, PNC Financial, U.S. Bancorp, and Wells Fargo) have been the leaders in overall customer satisfaction. In addition to digital offerings, they increased their score in personal interactions.

More importantly, their scores were positive from three key groups: Millennials, emerging affluent consumers, and minorities (defined as black/African-American, Latino/Hispanic and Asian/Asian-American).

These groups represent important demographic shifts for banks to be aware of. Nearly 50% of consumers in the U.S. are 35 or under, and thus classified as the Millennial segment. This segment of the population will be increasing in the future. The wealth of Millennials and their need for sophisticated financial services will also be rising in the future.

The wealth of Millennials will be rising in the future, making them one of the most important market segments.

The percentage of minorities is also estimated to climb significantly over the next two decades.

Seasoned Loan Advisors Can Give Advice on Portfolio Maximization
The results of the J.D. Power survey make it clear that banks must aggressively pursue customer satisfaction going forward, and that customer satisfaction depends on aggressive development and maintenance of digital channels, including online and mobile.

Loan sale advisors can help adjust portfolios and introduce digital lending options to maximize income and profits. These profits can assist with adjusting and growing bank strategies for customer satisfaction and retention.

Keeping abreast of banking news as it pertains to loan portfolios is important to the steady growth of banks. Count on Garnet Capital to keep you up to date with the latest trends and news in this area. Sign up for our newsletter to have the most recent news at your fingertips.