There's a growing divide between the way bankers and consumers view the banking industry, according to the annual Bank Administration Institute Index of Bank Consumer Sentiment. Not surprisingly, bank executives have a rosier view of the economy and consumer's feelings toward banking institutions than consumers themselves reported.

The research established a baseline for banker and consumer sentiment in August 2009 and retested it again in February. While bankers' opinions of consumer sentiment rose 11 points (from 126 to 137 over the six months), the consumer sentiment index, which is a measure of how the bank customers actually feel, moved in the opposite direction, dropping 19 points (from 100 to 81) and widening the gap in August by more than 50%.

Thirty-six percent of bankers surveyed in February felt the economy was better compared with six months earlier, up moderately from August, while consumers who felt the same way was up slightly at 18%. Only 44% of consumers feel strongly that their financial situation will improve as opposed to 47% in August. The results were released late last month.

"One key takeaway is that consumer sentiment overall as it relates to the economy has improved but as it relates to industry as a whole, primary financial services, has declined," said Deborah Bianucci, the chief executive of the BAI.

The study also found that 21% of consumers, up from 17%, said that they "didn't feel as good about trusting their primary financial institution to look out for their financial interests." Consumer loyalty varied depending on the type of bank they used. Loyalty rose the most, by 37 points, at online banks and brokerages such as Charles Schwab Corp. and Fidelity Investments. Consumer loyalty toward large banks fell the most (16 points), while regional banks fell nine points and community banks fell only four points. Consumer loyalty toward credit unions rose six points and toward brokerage firms rose five points.

With looking at various aspects of loyalty measures, online banks and brokerage have had a sharp increase in loyalty measures, where large and regional banks have had a slight decline, and community banks have been flat, Bianucci said. "With regard to the banks in general, our theory is that there's been a lot of negative press about fee income and that has had a dragging-down effect."

Online banks and brokerages have the luxury of dealing with one delivery channel, pointed out Ajay Nagarkatte, managing director of research at the BAI. As such, they have been able to focus their resources on perfecting that channel more easily than banks with multiple delivery services. "In a multichannel environment, it's more complex to determine how to deliver customer service," he said. "Everything is consolidated in an online bank/brokerage. If you were to speak to executives of online banks they would tell you that many outsiders see their advantage as one of price and certainly there's price competition in the forefront, but because it's a singular channel, they have the gift of focus. They can consistently deliver to exceed the expectations of consumers. Consumers will tell you their experience online is very different than in a branch."

While online banks are still by far the minority — the top three large banks still have 30% of the customer market and top five or six banks have about half the market — online banking and brokerage is growing faster, Nagarkatte said. "The online-only channel is still smaller but will grow because it provides a lot of value, and the technology through that channel has improved tremendously."

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