Understanding Actual vs. Intended Customer Attrition

Did you know that customers who INTEND to switch primary financial institutions have the greatest value?

Bank customer attrition rates, both actual and intended, continue to increase. According to data from our J.D. Power and Associates 2012 US Retail Banking Satisfaction Study, intended attrition has increased significantly to 12.9% from 10.7% in 2011 after having decreased from 2010 to 2011. The actual attrition rate has steadily increased since 2010, reaching 9.6%(1) this year.

By bank size, Midsize Banks have the highest attrition rate (11.3%), followed by Regional Banks (10.3%); Big Banks (10.0%); and Small Banks and Credit Unions (7.4%).(2) While most customers who switch leave one Big Bank for another Big Bank (29%), 19% of customers switch from a Big Bank to a Small Bank or Credit Union, demonstrating customers’ willingness to trade the convenience of a large banking network for the personal service of a local small banking network or credit union.

Notes: Actual AttritionRate is based on the 2012 Financial Services Screener

More alarming than the actual and intended attrition rates is the fact that customers who intend to switch primary financial institutions have the greatest value(3)—29 percentage points higher than industry average—while customers who recently switched have a value that is 19 percentage points higher than average. Conversely, customers who have no inclination to switch are less valuable than industry average (-5 percentage points).

Note: Customer value is shown as percentage points above and below the industry baseline; for example, “19%” means that segment is 16 percentage points above the industry average, or 119%.

THE BOTTOM LINE:  Customers who say they are planning to switch can be more valuable than even those that have already switched.  It’s critical to understand your drivers of attrition and prioritizing efforts to influence those customers not to switch!

(1) Source: 2012 Financial Services Screener
(2) Big Banks are defined as the six largest financial institutions based on total deposits as reported by the FDIC ($180 or more); Regional Banks are defined as those with $180 billion – $33 billion in deposits; Midsize Banks are defined as those with $33 billion – $2 billion in deposits; Small Banks/Credit Unions are an aggregate of all other banks.
(3) This calculation focuses on three equally important components of customer value: total investable assets; total amount of deposit accounts; and total amount of borrowing accounts. Each of these three components was given equal weight and indexed to the overall baseline of the industry average.
All of the above data:  ©2012 J.D. Power and Associates The McGraw-Hill Companies, Inc. All Rights Reserved.  Reproduction is Prohibited.
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