Why fewer consumers are switching banks

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Consumers may not entirely trust their banks, but few are dissatisfied enough to consider moving their accounts to other banks, according to new data from J.D. Power.

Last year, only 4% of consumers shifted their primary accounts to a new institution, J.D. Power found — the lowest level measured since the research firm began tracking switch rates a decade ago in its annual U.S. retail banking satisfaction study. The switch rate peaked at 8% in 2016.

Customers are staying put because banks, particularly large ones, have made banking so convenient that account holders are shrugging off any concerns they may have about banks’ broader reputational issues, said Paul McAdam, senior director of banking intelligence at Costa Mesa, Calif.-based J.D. Power.

“It’s really about the convenience,” McAdam said. He noted that large and regional banks are using their heft to blanket areas with branches and make big investments in online and mobile banking and the result is that “the satisfaction levels for these banks are up materially.”

In its 14th annual retail banking report, released Thursday, J.D. Power found that the 10 largest retail banks have grown their share of industry deposits from 39% to 48% since 2009. In the same period, their share of branch offices has risen from 26% to 31%.

And millennials, it seems, are driving big banks’ growth in market share. Consumers under the age of 40 tend to open accounts and then stay put because they find the products and services to be superior to those offered by smaller banks. According to J.D. Power, banks with less than $55 billion of assets saw significant declines in satisfaction ratings among consumers under 40.

Still, satisfaction is not synonymous with trust. In its report, J.D. Power said that while satisfaction levels are up thanks to improved convenience and products, reputation scores are still below pre-financial crisis levels because many consumers still believe banks put their own interests above those of their customers and don’t resolve problems in a timely manner.

“The industry has improved convenience and driven increased levels of operating efficiency, but a trade-off for banks is a decline in easy interaction, providing advice and strengthening customer relationships,” J.D. Power said in a news release announcing the results of its annual customer satisfaction rankings.

The rankings themselves were a mixed bag. In some regions, large or regional banks had the highest customer satisfaction scores. JPMorgan Chase, for example, ranked No. 1 in customer satisfaction in California and Florida, while TD Bank scored highest in the Southeast.

But in several other regions, community banks topped the rankings — despite millennials’ distaste for small banks. Privately held institutions scored particularly well in this year’s rankings, an indication that many consumers across all age groups still prefer to bank with local banks, McAdam said.

“There is certainly something about not having the quarter-to-quarter financial pressures,” McAdam said. “They have the ability to take a bit longer with their investments and building their culture.”

In the Southwest region, the top three performers were the $17.2 billion-asset MidFirst Bank in Oklahoma City; the $18.4 billion-asset Arvest Bank in Fayetteville, Ark.; and the $18.5 billion-asset FirstBank in Lakewood, Colo. All are privately held.

In the New England region, the top two spots went to mutual banks — the $4.4 billion-asset Bangor Savings Bank in Maine and the $11.4 billion-asset Eastern Bank in Boston.

MidFirst won the Southwest with an 859 score, on a 1,000-point scale. The national average score was 807. Bangor topped the New England rankings with a score of 872.

In California, JPMorgan Chase and U.S. Bank switched places at the top of the rankings, compared to 2018, with scores of 823 and 807, respectively. Meanwhile, and Wells Fargo moved up from the basement in its home state, as its score rose 6 points to 787.

Chase also took the top spot in Florida with a score of 847, replacing TD Bank. In Texas, the $32.4 billion-asset Frost Bank, a unit of Cullen/Frost Bankers in San Antonio, won the region for the 10th straight year with an 884 score, the highest score earned by any bank in all regions.

In the Mid-Atlantic region, the $13.7 billion-asset Union Bank & Trust in Richmond, Va., made a big move up the rankings, rising 41 points to 856. In the Midwest, the 15 bank brands operated by the $31.3 billion-asset Wintrust Financial in Rosemont, Ill., placed first with an 845 score.

The $4.8 billion-asset City National Bank in Charleston, W.Va., was the lead bank in the North Central region with an 842 score. In the Pacific Northwest, the $11.6 billion-asset Banner Bank in Walla Walla, Wash., with an 870 score.

Arvest topped the South Central region with an 841 score. TD Bank won the Southeast region with a score of 858.

HSBC again held the distinction of posting the worst overall score in any region, with a 744 score in the Mid-Atlantic region. Last year, HSBC recorded the worst score with a 737.

The scandal-plagued Wells Fargo stumbled again, ranking in the lower half in all regions, and placing last or next-to-last in eight of the 11 regions.

J.D. Power compiled the scores between April 2018 and February by surveying about 84,000 consumers of the 200 largest banks. The research firm measured consumers’ satisfaction with opening an account, communication and advice, channel activities, convenience, problem resolution and product and service offerings.

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