There are times when the release of a new survey of the banking industry can trigger a sinking feeling.  Haven’t we had enough bad news already?

Well, cheer up: The J.D. Power 2016 U.S. Retail Banking Satisfaction Study brings good tidings for most segments of the banking sector. And going against widespread perceptions, that actually maintains an extended streak.

First, larger institutions—those dreaded Big Banks—have jumped in overall customer satisfaction. . .again. In fact, that’s how it’s been for six straight years.  There’s more than a single factor at play here—the blitz of digital tools with user-friendly features, a renewed emphasis on personal engagement with customers, and targeted outreach to specific customer groups have all helped boost the satisfaction ratings.

The results get even more interesting when we drill down a little. Periodically derided for lacking agility and innovation, at least when compared to tech firms crashing the industry, those larger institutions actually score highest in many of the categories that matter most in this digital-driven environment: mobile, ATM and online banking.  The first of those, mobile, is truly a standout, drawing satisfaction scores 27 points higher among customers who use mobile banking than those who don’t. And while there’s no telling what particular platform on consumer preference might emerge next, that unquestionably bodes well for the future.

In fact, this trend leads directly to perhaps the thorniest issue: keeping millennials happy. This is clearly the fastest growing customer segment, and also the most fickle. Those pesky young people switch platforms and tools without hesitation, and that takes its toll on institutional loyalty—the growth potential is matched by attrition rates. Well, the new survey reveals that big banks are indeed the most successful at acquiring and satisfying millennials, the fastest growing customer segment.

Branches represents another area fraught with complications. It’s an issue that’s been explored often on this blog and others—as online and mobile banking become the norm, what happens to the outlets that have always served as the face of the corporation? The J.D. Power study acknowledge the ongoing evolution in this corner of the industry, and highlights the contradictions involved.

To be sure, the number of branches is indeed falling. However, they’re not about to completely disappear either—while customers open accounts online in greater numbers, they also appreciate the value of a brick-and-mortar establishment that can  enhance the understanding of complex financial issues. In other words, branches will remain, provided they can embrace their new functions. While customers go online for many basic services, they like the idea of a physical entity with real-life individuals to help sort through more complicated process—think mortgages or bank loans.

The J.D. Power study, which has been going for 11 years, is arguably the largest of its kind. It’s billed as the “longest-running and most in-depth survey of the U.S. retail banking industry,” with part of the research involves querying 75,000-plus customers about their banking experience. Those seeking more specific insights will find that the report measures satisfaction in six factors: account information; channel activities; facility; fees; problem resolution; and product offerings. There are more focused analyses as well, on subjects ranging from ATM-related services to Interactive Voice Response and the appeal of the corporate site.

For the record, any examination this comprehensive is bound to turn up les happy news, and this one is no exception. Specifically, while the bigger banks are doing better, midsize banks are doing worse, although they still retain high satisfaction ratings in many areas. This is indeed a troubling trend that we’ll explore in greater depth later. For now, however, it spears that unless there’s a full-on course reversal, midsize institutions are at risk. In fact, without some major changes, we could be seeing major consolidation in this sector within a few years.

Again, this is one study covering one year—given the pace of change in contemporary business, we might get very different results in the next iteration. But that won’t happen without proactive changes on the part of those facing darker times ahead. This report makes it clear that big banks have stepped up, with extensive resources devoted to online and mobile initiatives, even as their branches changes their basic operating procedures.  Those efforts are definitely paying off. It might be time for other industry segments to change too.

 

Written by Jack Dougal