J.D. Power and Associates Reports: Bank Customer Switching Rates Rise
Again, Fueled by Issues with Fees and Poor Service
backlash against bank fees, coupled with poor service and unmet
customer expectations, has fueled increases in defection rates among
customers of large, regional and midsize banks, according to the J.D.
Power and Associates 2012 U.S. Bank Customer Switching and Acquisition
StudySM released today.
On the heels of "Bank Transfer Day" on
beneficiaries of the increased exodus from larger banks are primarily
smaller banks and credit unions. Acquisition of new customers by
smaller banks and credit unions has increased by 2.2 percentage points
to an average of 10.3 percent in 2012 from 8.1 percent in 2011. Among
big banks, regional banks and midsize banks(1), switching rates
average between 10.0 and 11.3 percent, while the defection rate for
small banks and credit unions averages only 0.9 percent, a significant
drop from 8.8 percent in 2011.
The study, which examines the bank shopping and selection process,
finds that 9.6 percent of customers in 2012 indicate they switched
their primary banking institution during the past year to a new
provider. This is up from 8.7 percent in 2011 and 7.7 percent in 2010.
The study finds that, not unexpectedly, fees are the main reason
customers shop for a new primary bank. In particular, one-third of
customers of big and large regional banks cite fees as the main
"When banks announce the implementation of new fees, public reaction
can be quite volatile and result in customers voting with their feet,"
Power and Associates.
However, according to Beird, customers weigh the price they pay
against the value of their experience.
"It is apparent that new or increased fees are the proverbial straws
that break the camel's back," said Beird. "Service experiences that
fall below customer expectations are a powerful influencer that primes
customers for switching once a subsequent event gives them a final
reason to defect. Regardless of bank size, more than one-half of all
customers who said fees were the main reason to shop for another bank
also indicated that their prior bank provided poor service."
In capturing customers who are shopping for a new bank, several of the
more successful banks achieve higher acquisition rates through the use
of promotions and cash incentives. At one of the highest-performing
big banks, 19 percent of customers indicate these promotions were the
reason they selected their new bank. However, according to Beird,
doing a good job for customers is not just about dollars, but also
about loyalty and retention.
"Only 32 percent of customers who selected a new bank because of
promotional offerings said they definitely would not switch banks
again in the next 12 months," said Beird. "In comparison, 46 to 51
percent of customers who chose the new bank because of either good
service experience or positive recommendations say they definitely
will not leave within the next year."
For customers thinking about switching banks to find one that is
better aligned with their expectations and needs,
Associates offers the following tips:
— Shop around to compare terms and service before deciding on a bank,
the same way you might before buying a vehicle. Don't forget about
direct online banks, as their competitive fees and rates may offset
any inconvenience due to lack of physical branches.
— Don't be swayed by promotion gifts/cash alone. It is more important
to ensure the bank that you are selecting offers the right products to
meet your needs and that the fees associated with the products are in
line with what you are willing to pay.
— Read account brochures and disclosures carefully and don't be
afraid to ask questions about the products you are about to open. It
is important to fully understand how fees are charged and how fees can
The 2012 U.S. Bank Customer Switching and Acquisition Study is based
on multiple evaluations from 5,062 customers who shopped for a new
banking account or new primary financial institution during the past
12 months. The study was fielded in November and
Capital One; Chase;
(1) Big banks are defined as the six largest financial institutions
based upon total deposits as reported by the
defined as those with between
Small/community banks and credit unions are an aggregate of all other
About J.D. Power and Associates Headquartered in
services company providing forecasting, performance improvement,
social media and customer satisfaction insights and solutions. The
company's quality and satisfaction measurements are based on responses
from millions of consumers annually. For more information on car
reviews and ratings, car insurance, health insurance, cell phone
ratings, and more, please visit JDPower.com.
is a business unit of
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