Direct banks in the US continue to grow in popularity but instead of replacing incumbents, the new model is giving many established financial brands an opportunity to shine with new customers.
Success in delivering superior customer service is helping established brands such as Charles Schwab, Discover and American Express outperform neobank challengers.
JD Power’s US Direct Banking Satisfaction Study, now in its sixth year, was redesigned for 2022. The study measures overall satisfaction with direct bank and neobank checking and/or savings/money market products based on seven factors (in alphabetical order): customer service; ease of moving money; helps grow money; level of trust; managing account via mobile app; managing account via website; and reduce banking fees.
The study defines direct banks as online/branchless institutions with federal banking charters, with either the Federal Reserve Board, the Office of the Comptroller of the Currency (OCC) or the Federal Deposit Insurance Corporation (FDIC) as their primary regulator.
Key findings of the 2022 study include:
- Big financial brands get the direct bank formula right. Among direct banking customers, satisfaction with their checking and savings accounts is high. A large majority of checking and savings customers (88%) say their direct bank is easy to do business with and 85% say their accounts do not have hidden fees. Only 6% of checking and savings customers say their direct bank does not put the customer’s interests first. Big brands American Express, Charles Schwab Bank, Discover Bank, Ally Bank and Capital One are tightly clustered at the top of the rank charts.
- Customer service matters. Although direct banks have always been prized for their easy-to-access, self-service nature, customer service (via phone and online chat/email) is a key driver of customer satisfaction. Among checking and savings customers, 59% say they have never had a problem or complaint with their direct bank. Among customers who experienced a problem/complaint in the past 12 months, 83% say it was convenient to reach customer service and 88% say their most recent problem was resolved.
- Supporting customers in tough economic times. The key performance indicator with the greatest influence on overall direct bank customer satisfaction is the customer perception that their bank completely supports them in challenging times. When direct banks meet that criteria, satisfaction among checking account customers rises 204 points (on a 1,000-point scale) and satisfaction among savings account customers rises 186 points.
- Neobanks gain traction with fee-sensitive customers, but satisfaction varies: Neobanks—those online-only banking providers without federal banking charters—continue to gain customers who tend to be younger, less financially secure and more sensitive to banking fees. Overall, neobanks lag direct banks across most key factors evaluated in the study. However, the areas in which neobanks outperform direct banks are related to personalisation and providing innovative technology.
“Today, 27% of banking customers in America use an online-only bank,” says Paul McAdam, senior director of banking and payments intelligence at JD Power. “As so much of our lives continue to shift to digitally based providers, direct banks have been in prime position to gain market share and mindshare by delivering around-the-clock access, along with products that have attractive fee structures and interest rates.
“Increasingly, we’re seeing the top-performing brands get the personalisation formula right by helping customers reduce banking fees and grow their money, and by showing that they’re available to help customers in challenging financial times.”
JD Power US Direct Banking Satisfaction Study (current account providers on a 1,000 point scale)
- Charles Schwab 715
- Discover 715
- Ally Bank 709
- Capital One 703
- e Trade Bank 688
- TIAA Bank 670
- Varo Bank 647
- CIT Bank 638
- Axos Bank 627
JD Power US Direct Banking Satisfaction Study (savings providers on a 1,000 point scale)
- American Express 718
- Discover 717
- Charles Schwab 713
- Ally Bank 710
- Capital One 702
- Marcus by Goldman Sachs 692
- Varo Bank 689
- E Trade Bank 676
- TIAA 672
- Barclays 668
- Synchrony Bank 666
- Axos Bank 660
- Citi 651
- CIT Bank 641
- Sallie Mae Bank 624
Source: JD Power