Old-school email could help midsize banks close digital gap

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The answer to one of the biggest digital challenges facing executives of midsize banks may be sitting in their inboxes.

First, the problem. A J.D. Power study conducted before the pandemic reiterated an ongoing concern for midtier banks: The six largest banks in the U.S. had the most digitally engaged customers, with 49% of big-bank customers reporting high levels of mobile and online use. That compared with 41% of regional bank customers and just 36% of midsize bank customers.

The study defined regional banks as those with $55 billion to $250 billion in domestic deposits and midsize banks as having less than $55 billion in deposits.

The solution? It could be as simple as sending an old-fashioned email, according to Paul McAdam, J.D. Power’s senior director of banking intelligence

Increased communication, particularly by email, could help regional and midsize banks reach the younger consumers they tend to lack. Those consumers tell the research firm that they want more advice about how to handle financial basics, like budgeting and saving, McAdam said.

“These younger customers really do want more communication from the bank. They’re telling us they’re not as satisfied with the frequency of advice or proactive contact from their bank,” he said. “When we ask people their preferred method of communication, email in particular is underutilized, particularly for the midsize banks.”

The need for such changes may be more urgent now that the coronavirus pandemic has forced banks to limit branch access to help slow the spread of the virus. Banking, for the indefinite future, has become a de facto digital banking environment.

All banks have work ahead of them to improve mobile and online experiences. Consistent with prior years, J.D. Power’s latest retail banking satisfaction study found that exclusively digital customers were less satisfied than those who use the branch.

And while branch-dependent customers tended to be much more satisfied with their bank, there is also a wrinkle to that distinction: Customers who linked their bank accounts to a digital payment service, such as Venmo or Zelle, were much more satisfied than those who had not.

"Not every bank out there has the P-to-P payments, [and] not every midsize bank has bill pay,” McAdam said. “Customers are noticing if they’re not available.

The big six banks are JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, U.S. Bancorp and PNC Financial Services Group. This group does not include Truist Financial, which was created through the recent merger of BB&T and SunTrust Banks and is now the fifth-largest U.S. bank by deposits.

When it comes to overall customer satisfaction, however, midsize banks fared better than their large and regional rivals. In eight of the 11 geographic regions J.D. Power tracks, a bank with less than $25 billion of assets ranked No. 1 in customer satisfaction. The only exceptions were in California and Florida, where Chase ranked No. 1, and in Texas, where the $34 billion-asset Frost Bank, a unit of Cullen/Frost Bankers, had the No. 1 ranking for the 11th consecutive year.

One bank, Arvest Bank in Fayetteville, Ark., was ranked No. 1 in both the Southwest and South Central regions. The privately held bank has $19.4 billion of assets and about 280 branches in Arkansas, Kansas, Missouri and Oklahoma.

Others that took top regional honors were: the $9 billion-asset S&T Bank in Indiana, Pa. (Mid-Atlantic); the $23 billion-asset First National Bank of Omaha (Midwest); the $4.8 billion asset Bangor Savings Bank in Maine (Northeast); the $5 billion-asset City National Bank in Charleston, W.Va. (North Central); the $14 billion-asset Columbia Banking System in Tacoma, Wash. (Northwest); and the $13 billion-asset United Community Banks in Blairsville, Ga. (Southeast).

Of that group, S&T had the highest overall satisfaction score — 871 on a 1,000-point scale.

Among the big six banks, Chase was the top performer. Apart from ranking No. 1 in California and Florida, it also placed second in the South Central region (Alabama, Arkansas, Louisiana, Mississippi and Tennessee) and had above-average marks in every other region.

The complete rankings by region can be found here.

Alan Kline contributed to this story.

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