Consumers Expect More From Banks Than Retailers

"Because most banks feel their industry is commoditized, many try to find differentiation in how they offer basic products such as free checking or interest-bearing accounts. Yet, this is one of the worst places to look for a long-term, competitive advantage," said Gary A. Williams, Executive Director of the KRI. "Consumers rate product uniqueness as one of their lowest desires from banks. What they really want is more competent staff and greater safety when using a bank."

After several years of stagnant growth earlier this decade, the banking industry is starting to develop competitive advantages to hold on to more customers and enable consistent revenue growth. For example, Bank of America has built a high rating in economies of skill with customers based on its superior Web site. The company is building a second strong barrier for entry to the market for its competitors by focusing on staff competence. Tellers are trained to "delight their customers" in much the same way a retailer's staff helps shoppers select merchandise.

Both banking and retail consumers believe customer loyalty is the most critical success factor to being competitive - today and in the future. After customer loyalty, the next most important factors to banking consumers are executive credibility and technology.

"While showing customer loyalty is critical across industries, how to best demonstrate a bank's loyalty is not that straight-forward," said Amy Levitt, Director of the KRI. "In the future, technology will be twice as critical to a bank's success as it is today. Retailers think of technology as their Web sites, yet banks must expand their use of technology to include distinct areas such as ATMs, credit cards, electronic deposits and wire transfers. Technology is everywhere in the banking experience."