J.D. Power Report Says Banks Must Address Steady Decline in Customer Satisfaction

Banks have some work to do if they wish to regain some of the loyalty of their customers, especially in light of the financial crisis. According to the J.D. Power and Associates 2009 Retail Banking Satisfaction Study, customer commitment to the nation's retail banks is on a steady decline.

The study is in its fourth year and found that only 35 percent of customers are highly committed to their retail bank in 2009, compared with 37 percent in 2008 and 41 percent in 2007. J.D. Power defines "highly committed customers" as those who, on average, use more products, give more referrals and are much less likely to switch to another bank, compared with customers who have lower commitment levels.

"Customers reporting the lowest levels of commitment in 2009 happen to be those with deposit balances that are 15 percent higher than average," said Michael Beird, director of the banking practice at J.D. Power and Associates, in a statement. "With this in mind, it is crucial that banks take steps to address this steady decline in customer commitment, as moving just 5 percent of customers from low and moderate levels of commitment to high commitment can mean additional deposit growth of more than 2 percentage points higher than average. This is critical in an environment where 4 to 5 percent is the norm."

The study finds an increase in problems experienced by customers in 2009, as 15 percent of customers reported a problem in the past 12 months, compared to 12 percent in 2007. Among customers experiencing a problem, the most frequently reported issue deals with fees, with 46 percent of customers reporting a problem in 2009, versus 44 percent in 2008.

On the plus side, J.D. Power notes that banks seem to be improving their efforts in customer problem resolution, reporting consumers' satisfaction here jumped 30 points from last year to 527. The firm's Beird says this improvement comes as a result of banks trying to solve problems at the initial contact phase with the customer.

The Reputation Institute also issued findings from its Reputation Pulse survey that seem to be in line with what J.D. Power found. The Reputation Pulse survey measures the corporate reputations of the 153 largest U.S companies based on consumers' trust, esteem, admiration, and good feeling about a company across seven dimensions of reputation. A key finding was that of the 19 industries included in the survey, banking proved to have a weak reputation, ranking in the bottom four at 16th place.

Wells Fargo (San Francisco) and U.S. Bancorp (Minneapolis) were rated No. 1 and No. 2 in trust and respect with the general U.S. public. Rounding out the top five in the Reputation Institute's report were SunTrust Banks (Atlanta), Bank of America (Charlotte) and The Bank of New York Mellon (New York). The banks that were rated the best maintained strong financial performance in the eyes of consumers, according to the Reputation Institute.

In the J.D. Power survey, high performers, by region, include:

Mid-Atlantic Region: TD Bank ranks highest in the region with a score of 774, performing particularly well in convenience. Community Bank (766) and Susquehanna Bank (761) follow in the regional rankings.

Midwest Region: With scores of 754, Commerce Bancshares, Inc., and Harris National rank highest in a tie in the region. Chase follows with a score of 748.

Mountain Region: Wells Fargo ranks highest in the region with a score of 727, performing well in account initiation/product offerings, account statements, convenience, fees and transactions.

New England Region: People's United Bank ranks highest with a score of 751, performing particularly well in convenience, account initiation/product offerings, account statements and transactions. TD Bank (746) and Wachovia (726) follow in the rankings.

Southeast Region: With a score of 815, Arvest Bank ranks highest in the region and performs well in convenience and account initiation/product offerings. First Tennessee Bank (788) and First-Citizens (Bancshares) (771) follow in the regional rankings.

Southwest Region: Wachovia ranks highest in the region with a score of 792, performing well in account initiation/product offerings, fees, account statements and transactions. Zions First National Bank follows with a score of 760, and Capital One ranks third with 756.

West Region: Bank of the West ranks highest with a score of 749 and performs well in account statements and transactions. Wells Fargo (743) and WaMu (730) follow in the regional rankings.

J.D. Power polled 28,570 households regarding their experiences with their primary banking provider back in January. The study analyzes customer satisfaction with the retail banking experience based on six factors: transactions; account statements; account initiation/product offerings; convenience; fees; and problem resolution.