Online-only banks outshine traditional rivals — with one exception

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Digital banks have steadily taken market share from traditional banks, but the coronavirus pandemic could challenge a consistent weak spot of theirs: the call center.

According to J.D. Power’s latest direct banking study, online-only banks earned an overall satisfaction score of 864 out of 1,000, compared with the score of 807 that traditional banks earned in a separate survey.

But the firm also cited the call center as a consistent weakness for digital-only banks. Customers of digital-only banks reach out to the call center at almost twice the rate of traditional banks’ customers, and 40% of those customers said they waited five minutes or more to reach a live representative.

Ranking direction banks on satisfaction score

That hold time matters because overall customer satisfaction scores fall an average of 34 points when on-hold wait times run longer than four minutes, J.D. Power said. Many banks have now closed branches to contain the spread of COVID-19, meaning more customers will rely on call centers while many of those call center employees are learning to work remotely for the first time.

“These challenges are going to hit every bank, whether they’re direct or traditional, and they’re hitting any company that has frequent call center activity,” said Bob Neuhaus, vice president of financial services at J.D. Power. “The companies that can get their arms around it most quickly will mitigate the damage to some degree with their customers if wait times are not long, and they can deliver on services that people need.”

Charles Schwab Bank earned the highest overall satisfaction score, 875, among all the digital banks measured in J.D. Power’s study. E-Trade Bank earned a score of 869, and Discover Bank earned a score of 863. J.D. Power’s study did not look at the digital brands of traditional banks, such as MUFG Union Bank’s Purepoint or Citizens Financial Group’s Citizens Access.

J.D. Power also looked at the San Antonio-based USAA in this study, but it excluded that bank from the overall rankings because it only serves military members and families.

The firm conducted this survey from December 2019 through January, before the novel coronavirus gained a foothold in the U.S. In accordance with public health experts’ recommendations, many banks have closed or limited access to branches, instead directing customers to use online and mobile banking channels. That has produced what Neuhaus called a “de facto direct banking environment.”

While necessary to stem the spread of the virus, these branch closings could also have the effect of accelerating a consumer transition from branch banking that was already underway, he said.

“I would speculate that there’s going to be a significant shift in how people interact with their banks as this settles down,” Neuhaus said. “As people become more savvy using digital tools to solve different issues, it’s going to reduce the reliance on branches.”

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