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June 29, 2018updated 03 Jul 2018 11:00am

Direct banks outclass traditional retail banks in customer satisfaction

Direct banks continue to surpass traditional retail banks in overall customer satisfaction, according to a new study published by US-based information services company J.D. Power.

The report, J.D. Power 2018 U.S. Direct Banking Satisfaction Study, further reveals that despite better customer satisfaction level, the challenger banks are gradually losing sheen compared to traditional retail banks in terms of customer understanding and mobile experience.

While conducting the study, J.D. Power took into account the following key performance indicators—providing tailored information to meet customer needs, understanding product features and understanding fee structures— and concluded that digital banks are declining to meet these metrics year over year.

J.D. Power financial services consultant Bob Neuhaus said: “Direct banks have traditionally occupied a niche of the retail banking marketplace where they serve mainly as secondary banks with competitive products and strong digital- and phone-based tools that drive high levels of customer satisfaction.

“However, these banks still represent less than 10% of industry deposit share and they are experiencing some deterioration in customer satisfaction with customer understanding and mobile offerings. If they want to evolve from a secondary to a primary bank relationship, they need to focus on cross-channel consistency and ramp up their digital capabilities.”

According to the study, the overall satisfaction score for direct banks is 863 (on a 1,000-point scale), which is 57 points above compared to the overall satisfaction score for traditional branch-based retail banks.

More than three-fourths (77%) of direct bank customers are using the mobile channel (an increase of 5 percentage points from 2017); however, mobile banking customer satisfaction has gone down 8 points from last year.

Just 43% of direct bank customers use their direct bank as their primary bank. Overall satisfaction among that 43% is 873, which is 18 points higher than among customers who consider their direct bank to be a secondary banking relationship.

Social media is key marketing channel for direct banks, as 38% of direct bank customers who opened a new product in the last one year, said that they were influenced by social media to open the new product.

Among the challenger bank, Capital One 360 secured the highest rank in overall satisfaction with a score of 867, whereas Ally Bank ranks second with 865 point and Charles Schwab Bank stood third with 863 points.

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