Banking Customers Prefer to Bank Online

The inaugural study, which focuses on performance among the nation's largest banks, analyzes the retail banking experience from two points of view -- customer satisfaction and customer commitment.

The study finds that transactions have the greatest impact on a customer's overall satisfaction with their bank. The average online transaction takes just 2.8 minutes to complete, compared to 7.7 minutes of combined wait and transaction time with a branch teller. Overall, in-person branch transactions are conducted most frequently and are next highest in satisfaction, followed by ATM and online transactions.

"Banks certainly face a challenge in today's extremely competitive market in that customers crave the convenience of banking online, yet still also require a personal touch," said Jeff Taylor, director of the banking practice at J.D. Power and Associates. While customers appreciate the convenience of banking online, those who visit the branch less often tend to demonstrate lower satisfaction levels.

The study also finds that while bank products are viewed as a commodity to many customers, products that once helped attract new customers, such as free checking, are now widely offered and expected from customers. Currently 90 percent of banking customers indicate having free checking, and 94 percent of banks offer free online banking and free debit cards.

"As it becomes increasingly difficult for banks to differentiate themselves from their competitors, they constantly have to find opportunities to be innovative in attracting the attention of potential customers," said Taylor. "Online products and services represent a clear opportunity for banks to differentiate themselves to potential customers."

The second dimension of the study, which analyzes customer commitment, gives the industry a more complete picture of a customer's revenue potential to the bank. Customer satisfaction is a major aspect influencing customer commitment to the bank, in addition to brand image and a customer's propensity toward loyalty.

The study finds a strong positive relationship between customer commitment levels and the number of revenue-generating banking products a customer utilizes, as well as the number of times a customer recommends the bank to others. Customers with commitment levels in the top 25 percent use an average of 3.3 banking services, compared to 2.5 for those in the bottom 25 percent. Fifty-five percent of highly committed customers also have loans with their primary bank and make 6.6 recommendations of the bank to others. Among those with low commitment, just 31 percent have loans with the bank, and they average fewer than one recommendation. Overall, the retail banking industry enjoys a commitment level of 28 percent, compared to 13 percent, on average, in other industries measured by J.D. Power and Associates.

Commerce Bank, Downey Savings and Loan and USAA are among banks that record particularly high levels of both customer satisfaction and customer commitment.

"We find that banks with strong brand image can have highly committed customers, despite lower satisfaction scores, and vice versa," said Taylor. "But overall, customer satisfaction and commitment are closely entwined. Satisfaction is what banks can control, while brand image and commitment is developed over time. Banks that understand and analyze this relationship are better equipped to develop strategies to attract and retain customers."

The 2006 Retail Banking Satisfaction Study is based on responses from 12,904 households regarding their experiences with their primary banking provider. The study was fielded in October 2005. Complete customer satisfaction rankings of banks in the New York Metro area and the state of California will be released in late March and late April, respectively.