Understanding ‘Virtual-Only’ Retail Banking Customers

With increased functionality such as mobile phone check deposits, online chat, envelope-free ATM deposits, and image-enabled ATM receipts, retail banking customers are able to fully manage their account without ever stepping into a branch or contacting the call center. While this can create significant cost savings by reducing branch traffic and decreasing the number of calls to the call center, there is also a considerable downside, based on findings from the 2014 J.D. Power Retail Banking Satisfaction Study.

Despite having similar demographics and product portfolios, self-service customers—those who have interacted only via remote channels during the past 12 months for routine transactions—are not only less satisfied with their banking experience, but are also less committed than are those who have visited a branch or called the call center during the past 12 months for routine transactions. Further, self-service customers tend to be less engaged and, in fact, are often indifferent toward their bank, as a larger percentage of self-service customers say they “probably will” or “probably will not” recommend, reuse, and switch, compared with assisted customers.

Banks that are able to elevate customer commitment levels[1] among self-service customers can benefit from improved overall financial performance. Specifically, banks that convert 2% of customers with low commitment and 5% of those with medium commitment into customers with high commitment stand to gain $1.68 million in interest revenue from greater deposits, investments, and loans per 100,000 customers[2].

Analysis of study data also finds that some banks are currently more successful at satisfying their virtual-only customers. For example, as displayed in the chart below, Bank K has the lowest overall satisfaction score amongst its virtual-only customers (720 on a 1,000-point scale). Meanwhile, Bank H has the largest percentage of virtual-only customers within their population (40%), making it especially critical for them to improve the overall experience of virtual customers.


Self-service customers have different priorities and needs than assisted customers, which makes it essential for financial institutions to adjust their strategy in servicing these customers. Recommendations for additional areas of focus include:

  • If you got it, flaunt it; if you don’t got it, get it. Channel features are important to this segment, and while banks often do offer the features customers want, many are unaware of them, so it is important to ensure features/services are fully marketed. Furthermore, banks should continually look to add features to meet the changing needs of customers and, in turn, to remain competitive.
  • Be proactive, not reactive. Self-service customers place great importance on product offerings and tend to be critical of their bank’s value proposition; therefore, financial institutions need to proactively communicate with these customers and ensure they are aware of all product features/services and fully understand how and when fees will be incurred. Moreover, banks should consider implementing programs in which bank representatives and advisors proactively reach out to self-service customers to provide advice related to their financial needs.
  • If it’s broken, fix it. It is critical for banks to minimize the occurrence of problems. To achieve this, banks should focus on reducing the problems that not only have the greatest impact on satisfaction and retention, but also those that occur most frequently. Banks need to collect and analyze customer and employee data to determine root causes of problems and revise processes that are ineffective or problematic. Furthermore, banks have an opportunity to improve their rates of problem resolution via remote channels. The level of service that is provided via all channels needs to be optimum; however, banks need to pay close attention to service levels by remote channels (email/online chat) ensuring consistent and effective resolution of issues. Additionally, banks need to understand which problems can’t be fully resolved using a remote channel and revisit policies and procedures to improve the effectiveness of these channels.

[1] High commitment is defined as providing combined ratings of 17-20 points based on responses to the four commitment statements; medium commitment is defined as providing combined ratings of 12-16 points based on responses to the four commitment statements; low commitment is defined as providing combined ratings of 11 points or less based on responses to the four commitment statements.

[2] Assumes a 3% interest margin

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Banking Customers with Business and Personal Relationships

Data from the 2014 J.D. Power Small Business Banking Satisfaction Study finds that approximately one-third of small business banking customers also have a personal relationship with their primary business banking institution.

These types of ‘cross-functional’ relationships are beneficial for financial institutions. First and foremost, the institution is holding a greater overall ‘share-of-wallet’. Additionally, business banking customers with a personal account report significantly higher satisfaction, loyalty and advocacy metrics (compared to business customers who do NOT also have a personal relationship). However, analysis of study data finds that some banks are struggling to maximize the full ROI of a cross-functional relationship.

For example, as illustrated in the chart below, Bank A is currently not receiving the same positive ‘lift’ when their small business customers also hold personal banking accounts.

TD Bank SBB_v1

Additionally, study data finds that the ability for Bank A to cross-sell their small business customers on personal accounts is lagging peers.

TD Bank SBB_v1_2

There are many potential reasons why a small business owner is unwilling to hold personal accounts with their business banking institution, including but not limited to:

  • Business institution may not be located near the customers home
  • The customer has a long-standing relationship with their personal institution and is currently satisfied
  • ‘Conflict of interest’ – some customers just want to separate their accounts

Regardless of the reason, the ability for the financial institution to provide excellent service and build trustworthy relationships is vital towards the goal of cross-selling business banking customers on personal accounts.

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Improving Consistency of Cross-Channel Interactions

With channel usage continuing to evolve within the retail banking and small business banking industries, it is important for banks to focus on delivering a consistent experience across all customer touch-points. Customers interacting with the bank via the website or call center should receive the same level of high-quality service they receive at a branch, and vice versa. However, analysis of data collected by J.D. Power finds plenty of room for financial institutions to further improve the consistency of cross-channel interaction.

One key example is with regards to Problem Resolution. As displayed in the chart below, small business banking customers report considerable differences in their experience depending on the channel used for resolving a problem. While Problem Resolution satisfaction is highest when interacting with branch personnel (tellers, business bankers and managers), there is a steep decline when dealing with call center and online representatives.

sbb post

Data in the chart above is from the 2014 J.D. Power Small Business Banking Satisfaction Study, but it is important to note that similar discrepancies in cross-channel interaction are evident in all financial services studies conducted by J.D. Power (retail banking, mortgage and investment). And these discrepancies are not always related to Problem Resolution, as many other aspects of the banking experience are also prone to cross-channel inconsistency, such as:

-Account initiation

-Clarity of account information

-Method of accessing secure website (PC vs. tablet. vs. Smartphone)

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Becoming a Trusted Advisor to Small Business Banking Clients

As identified in the 2014 J.D. Power Small Business Banking Satisfaction Study, one key aspect of the small business banking experience is the relationship with an assigned account manager.

When an account manager is assigned to a small business client, building a strong relationship becomes vital. Ideally, the account manager becomes viewed as a ‘trusted advisor’, which can help the bank maximize the ROI (return-on-investment) of assigning account managers to small business clients. In addition to having a significant impact on customer satisfaction, account managers that are viewed as a ‘trusted advisor’ can also drive increased loyalty and deepen the share-of-wallet customers hold at the bank.

Furthermore, the negative impact of not being viewed a trusted advisor is profound, as satisfaction levels are actually lower than when no account manager is assigned at all (643 vs. 723, respectively, on a 1,000-point scale).


Data from the Small Business Satisfaction Study also identifies clear steps that small business account managers can take to develop a strong relationship with their clients and improve the perception of them as a trusted advisor, including:

-Take time to engage clients and understand their business

-Initiate contact with clients throughout the year to discussed needs and/or recommend solutions

-Promptly reply to any inquiries from clients and show ‘concern’ for their needs


The 2014 J.D. Power Small Business Banking Satisfaction Study was released on October 28th, 2014.



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The Impact of Customer Service on Wait Time Satisfaction

Financial institutions often have staffing and queueing models in-place to minimize customer wait times and improve the efficiency of interactions. However, there are still instances where customers are forced to wait in-line at a branch or are placed on-hold before speaking to a call center representative. When traffic is high and customer wait/hold times are necessary, financial institutions can offset wait-time dissatisfaction by providing quality service once the interaction begins.

For example, the chart below looks at call-center satisfaction among credit card customers that waited at least five minutes before speaking to a call center representative. On average, all credit card customers waiting five minutes before speaking to a rep. have a satisfaction score of 775 (on a 1,000-point scale). However, when a customer waits five minutes and is then greeted in a friendly manner by their call center rep., satisfaction increases to 795. And when a customer waits five minutes, is greeted in a friendly manner and the phone rep had their account information ready prior to joining the call, satisfaction increases further to 827. Finally, satisfaction increases even more when the rep. offers additional assistance and thanks the customer for their business – when all four best practices displayed in the chart below are provided, satisfaction among customers waiting five minutes increases from 775 to 835.

Source: 2014 J.D. Power Credit Card Satisfaction Study


Similarly, among retail banking customers, simply greeting customers as they enter the branch can significantly improve satisfaction with wait-times in the teller line. In the chart below, satisfaction among customers who waited 3-4 minutes but received a greeting when entering is 8.60 on a 10-point scale, which is higher than customers that did not have to wait but did not receive a greeting when entering the branch (8.39).

Source: 2014 J.D. Power Retail Banking Satisfaction Study

14 RBS_Branch_Final


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Economic Outlook among Retail Banking Customers

Each year, J.D. Power surveys over 80,000 retail banking customers as part of the annual Retail Banking Satisfaction Study. The study is conducted via four quarterly fielding waves.

While the primary focus of the study is the customer experience and it’s impact on satisfaction and loyalty metrics, J.D. Power also collects and analyzes data related to consumer sentiment (i.e. ‘your outlook for our economy and ‘your personal financial outlook’).

Data from the first two fielding waves of the 2015 Retail Banking Satisfaction Study (collected in April 2014 and July 2014) finds that the outlook for the American economy continues to trend upward. In fact, there has been a consistent improvement in economic outlook since 2011, as the country moves further past the economic distress that originated in 2007/2008.

However, it is interesting to note how perceptions of the country’s economic outlook varies across the different geographic regions:

California customers are currently most optimistic, while customers in the South Central region are least optimistic.

Over the past 18 months, the outlook for the economy has improved the most among customers in the Northwest region, and improved the least among customers in the Southwest region.

Since 2011, the California and Northwest regions have seen the greatest improvements while the South Central region has seen the smallest improvement.

econ blog post slide

For reference, the regional definitions associated with the Retail Banking Satisfaction Study are displayed in the graphic below.

map for econ blog post

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Retail Banking ‘Problem Incidence’ Highest among Customers that are Young and Wealthy

Data from the J.D. Power 2014 Retail Banking Satisfaction Study finds that the industry continues to improve upon their ability to prevent problems. In fact, overall problem incidence has declined every year since 2010.

However, data also finds that problem incidence tends to be highest among retail banking customers that are both ‘young’ and ‘wealthy’. For example, over one-fourth (26%) of Affluent Gen Y customers have experienced a problem with their personal banking institution in the past 12 months.

Perhaps more importantly, these young and wealthy customers are less tolerant of perceived ‘problems’ with their current institution – when a problem occurs, they are considerably more likely to say that they ‘definitely/probably will switch’ banks in the next 12 months.

Industry Overview_Final

Young customers, such as those in the Gen Y age segment represent tremendous ‘growth potential’ for financial institutions, particularly if they are already considered to be ‘Affluent’. It is critical for financial institutions to gain a deeper understanding of the problems that these valuable customers are most likely to experience and develop correction action plans to prevent additional problems in the future.

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How does being a ‘low-cost’ bank impact outcome metrics?

Many banking institutions are evaluating their current fee structures and considering modifications in an attempt to drive bottom-line improvements, while also acknowledging the potential ‘fallout’ that can arise from a change to fee structures.

Using data from the U.S. Retail Banking Satisfaction Study, J.D. Power has analyzed the topic of fees from multiple angles. Among other things, prior analysis related to the topic of fees has found that:

  • The ‘negative impact’ of monthly maintenance fees has been decreasing within the retail banking industry, indicating that customers are becoming slightly more ‘accepting’ of monthly fees.
  • Many customers pay a higher-than-average fee, yet remain highly satisfied. This is driven by the delivery of a clear ‘value proposition’ from their bank (the customer feels that the benefits they receive from the bank outweighs the cost).
  • When implemented, fee changes represent a significant risk for banking institutions. Problem incidence will increase, driving an increase in labor costs associated with problem resolution. Intended attrition also increases, especially within the first month after a change.

When considering whether or not to increase/decrease monthly fees associated with checking accounts, it is important for banks to fully weigh the pro’s and con’s of the change. On one hand, an increase in the percentage of customers charged a fee (or an increase in actual fee amounts) can positively impact revenue.

However, as displayed in the chart below, data finds that banks who position themselves as a ‘low cost’ institution enjoy bottom-line benefits such as lower ‘cost-to-serve’, greater loyalty and greater share-of-deposits. Additionally, customers of ‘low-cost’ banks are significantly less likely to open additional accounts/products outside of the bank.

low cost

The decision to implement/increase/decrease fees should be unique for each and every banking institution depending on their overall strategic plans. It is critical, however, that they fully understand all potential ‘tradeoffs’ for any decision that is implemented. Analysis of consumer behavior and customer satisfaction data can be an extremely valuable tool to use when determining the appropriate cause of action.


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Investing in the Correct Channels

With the continued acceptance of digital banking channels, it is important for financial institutions to ‘keep up with the times’. Even banks that promote personal service as a key part of their value proposition need to devote investment resources to their digital channels. Failure to do so may put the bank at risk of losing customers that represent future growth potential (ie. Millennials), who have already shown a preference for digital interaction.

Data from the 2014 Retail Banking Study provides an interesting case study on the impact of investing in digital channels. As shown in the graphic below, ‘Bank A’ has been investing heavily in digital channels while ‘Bank B’ has not. Bank A has seen a greater lift in customer satisfaction, driven by their technology improvements. It is also important to note that, despite a heavy investment in digital interaction, Bank A has also been able to significantly improve the branch experience.


The chart below provides further evidence of the impact of investing in digital channels, as interaction scores for Bank A are significantly higher than those at Bank B. Additionally, the negative ‘gap’ in digital satisfaction between Bank B and the industry average has widened considerably.


Finally, the real impact of investing in digital channels is shown below, as Bank A has seen their key loyalty and advocacy metrics improve, while Bank B has seen declines.



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