We fielded our 2012 Financial Services Screener Survey in November of last year and found that customer defection is continuing a three-year rise (7.7% in 2010, 8.7% in 2011, and 9.6% in 2012 ). Not surprisingly both big and regional Banks are taking the hardest hit with defection rates increasing from 7% in 2010 to 10% this year which could be heavily influenced by the negative press big banks continued to receive in the media as well as consumer programs aimed at encouraging customers to leave big banks in favor of small institutions.
While it would be simple to attribute these trends to unwanted fees or service charges, the assumption would only be partially correct. The data from the 2012 Bank Customer Switching and Acquisition Study implies more complexity than one might otherwise presume. In response to identifying the single most influential reason customers started shopping for a new primary banking relationship, four reasons stand out regardless of bank size, and these are:
Fees and Rates: Either because they are dissatisfied at their current bank and want to shop around, or see more competitive rates elsewhere.
Life Circumstances: A factor largely outside the control of the bank, this includes events such as marriage, graduation, divorce, unemployment and retirement.
Unmet Expectations: A negative driver that some experience, or combination of experiences, did not fulfill the customer’s expectation of what banking at their former primary bank would be like.
Customer Service: A likely tangent to unmet expectations, poor customer service is a condition that, as this year’s data illustrated, is seldom a primary driver but one that sets the conditions for the customer leaving when another trigger (like fees or rates) arises.
While all banks share these four reasons as the top ranked shopping triggers, there are noted differences in priorities depending on which bank the customer had previously.
- One third of customers at the largest banks cite fees and rates as the primary shopping trigger incenting them to look elsewhere for a new primary bank relationship.
- Life circumstances trigger shopping more for customers of smaller mid-sized and community banks, as well as Credit Unions. Limited geographical coverage and fewer services severely limit the ability of banks with smaller footprints to meet the needs of many customers going through major changes in their lives.
- As a primary shopping trigger, customer service was identified by only 5% to 9% of customers across all types of banks. However, inasmuch as respondents could only select a single main reason for shopping, it is clear that service is a critical contributing factor, as opposed to the primary driver.