Credit Unions' Gains Could Help Banks Increase Satisfaction

The outpouring of consumer anger that found an outlet in Bank Transfer Day could actually improve some banks' relationships with their customers.

While some customers are moving their money from banks to credit unions, one potential outcome for the abandoned banks could be a boost in average consumer satisfaction among their remaining customers, according to the American Consumer Satisfaction Index. The Ann Arbor, Mich., index released its annual customer-satisfaction survey on Tuesday.

The magnitude of the exodus to credit unions remains in question, but some people are undoubtedly fleeing the big banks. Those customers are likely the most frustrated with banks, meaning that their loss could help pull up customer satisfaction scores at the institutions they are abandoning.

It is "certainly a possibility that the industry, as it loses customers, could look like it's doing a little better this time next year," says David VanAmburg, managing director of the American Consumer Satisfaction Index.

If there is "a little smaller bank industry by this time next year — while obviously still very large — the customers left in that industry might be a little more satisfied," he told American Banker in an interview last week.

Banks have historically trailed far behind credit unions on customer satisfaction surveys. But VanAmburg says the trends in customer satisfaction at Citigroup Inc. could indicate some future positive results for other large banks.

The third-largest U.S. bank saw a 5.8% jump in its customer satisfaction score this year, to a score of 73 from 69, according to ACSI's 2011 survey of bank customers.

"We think what's going on with …Citibank is that it has continued to shrink over the years," VanAmburg says. "It's becoming somewhat smaller, in terms of branches being shuttered and accounts shrinking. What will sometimes happen is satisfaction will go up."

But improved scores under those circumstances could be a mixed blessing for big banks, because they do not "mean a company has necessarily rolled out a big quality initiative," he says. "That could mean that you are losing your least satisfied customers. The number goes up because you are talking to a more loyal base."

ACSI collected satisfaction scores for the financial services industry in July and August, well before some banks' proposed debit card fees and the Occupy Wall Street protests this fall fed mounting consumer frustrations with banks.

JPMorgan Chase & Co. saw a year-over-year customer satisfaction boost of 4.5%, to a score of 70 from 67. VanAmburg said the reason behind that jump was inclusive.

Wells Fargo & Co. and Bank of America Corp., meanwhile, held steady at 73 and 68, respectively.

Even without factoring in the widespread uproar over its failed debit card fee proposal this fall, B of A has largely trailed its competitors since the financial crisis, when satisfaction scores dropped across the board.

The category of "all others," which includes banks ranging from large regional institutions to small local banks, fell slightly to 79 from 80 year-over-year, down 1.3%.

Credit unions, by comparison, jumped 8.7% in the same period, to a score of 87 from 80.

But it remains to be seen if credit unions will be able to keep their customer-satisfaction lead over banks as they welcome an influx of new customers.

VanAmburg says that some bank customers were already starting to transfer their accounts to credit unions over the summer, when the survey was conducted.

So far there has been a "halo effect" among those customers, who have reported very high levels of satisfaction with their new financial institutions, he adds.

But "the challenge for credit unions is if they really do see these kinds of [transfer] numbers that have been reported," says VanAmburg. "When small becomes big, it tends to lose focus…. If credit unions start to grow enormously, will they be able to keep satisfaction?"