Retail bank investments in technology are paying off with regard to digital-only bank customers. But some of the growth may be coming at the expense of customer satisfaction, says a new study by consumer insights firm J.D. Power.
28 percent of retail bank customers are now digital-only, but they are the least satisfied among all customer segments examined in the 2018 US Retail Banking Satisfaction Study.
Overall satisfaction is lowest among customers who exclusively used online or mobile banking channels during the past three months (791 on a 1,000 point scale). This was driven by weaker performance in three areas: communication and advice, products and fees, and new account opening.
Conversely, branch-dependent digital customers had the highest level of satisfaction (823 points). This group used their branch two or more times in the past three months, in addition to online or mobile banking channels. They were followed by digital-centric branch-using customers, who used a branch once in the past three months (808 points), again in addition to online or mobile banking channels.
The gap in satisfaction between digital-centric and branch-dependent customers cuts across all age groups. However, it is most pronounced among millennials (35-point gap) and generation X (those born 1965-76) with a 24-point gap. This bucks the conventional wisdom that millennials do not like to use branches.
Perhaps banks confuse digital savviness with financial sophistication. This leads to a misinterpretation of customer needs. Younger consumers often turn to their parents for financial advice. But if parents do not feel confident with financial matters themselves, banks have a opportunity to attract millennials into branches for in-person help and advice.
“There is no doubt that digital banking channels give banks an enormous opportunity to reduce costs, but the risk is that those cost savings come with lower levels of customer engagement,” said Paul McAdam, senior director in the banking practice at J.D. Power.
Retail banks need to address the growing digital divide emerging within certain customer segments. They must “provide better, more personalised advice that is consistent across both digital and branch interactions to ensure that customer needs are met regardless of channel,” maintains McAdam.
This is the crux of the bank branch dilemma. Branches are a retail bank’s biggest strength whilst at the same time being their biggest liability. Banks have been closing branches to reduce costs. But growing revenue is also key. An engaged customer uses multiple channels, including branches. And engaged customers are several times more profitable and loyal than those who only use digital channels.
The 13th annual US Retail Banking Satisfaction Study is based on responses from more than 88,000 retail banking customers of 200 of the largest US banks. It measured satisfaction in six factors: channel activities; communication and advice; convenience; new account opening; problem resolution, and products and fees.