The JD Power 2023 US Retail Banking Satisfaction Study has been released and as always is of interest, as it measures satisfaction across several factors like trust, account offerings, digital channels, and problem resolution. Amid a climate of ongoing inflationary pressures and economic uncertainty, banks are finding themselves in a difficult situation as the report acknowledges. Customers are clearly rattled and looking for guidance and advice.
The report suggests that most consumers are not getting enough of it, with just 21% of respondents saying they have received advice in the past year. There’s also the issue of more consumers experiencing problems with fees, fairness, and fraud. Meanwhile, deposits are on the move.
The US branch is alive and kicking
And then there is the issue of the future of the branch. Consumer behaviour in the US has always contrasted sharply with other mature banking markets such as the UK and Western Europe and in the US, branches remain more than relevant with a vast majority of consumers (72%) saying they plan to use their bank’s branches at the same rate as last year in the coming year and a significant chunk (38%) say branches are essential.
Notably, the report finds that the percentage of customers with $10,000 or more in primary bank deposit balances has declined 16 percentage points in the past year. Meantime, the percentage of customers categorised as financially unhealthy has increased 9 percentage points. This shift is causing more customers to reallocate their funds in the hunt for higher interest rates or better savings programmes, upping the ante for banks to deliver personalised advice and guidance.
Bank of America gains $15bn of new deposits post SVB failure
The JD Power report was prepared just ahead of the negative publicity connected with the failure of Silicon Valley Bank and Signature Bank. It is almost inevitable that events such as that will benefit the established, stronger incumbent banks. Indeed, Bank of America reportedly attracted more than $15bn of fresh deposits in the days following the collapse of SVB.
No doubt this trend will be confirmed with further evidence from other major US banks in upcoming quarterly earnings reports, when one glances at their rise in deposits. We do not have long to wait for this to be confirmed.
Customers need to feel supported through tough economic times but they also need to feel like their funds are safe and secure.
Meantime, almost dead-heating with the JD Power report in the inbox, global card issuing platform Marqeta has released its Consumer Pulse report. Again, it is well worth a read as it covers consumer behaviour in the US, UK and Australia. The Marqeta report notes that the cost-of-living crisis is materially impacting the housing sector with more than half (54%) of renters surveyed reporting that their rent increased within the past 12 months. For prospective buyers, rising interest rates make purchasing a home more expensive, with over half (51%) of renters surveyed indicating that increased interest rates and the general state of the economy have led them to decide to delay purchasing a house.
But this report suggests that the current economic climate means that consumers are evaluating their options in relation to their needs and level of awareness of emerging financial services. Marqeta suggests that consumers are weighing a profusion of options from non-traditional providers via embedded financial services. Almost half (47%) of respondents reported that they would consider financial services from non-financial institutions like tech companies, social networks and retailers.
We have read this many times and from a plethera of sources. It may well be the case that the challengers will score a hit in the current climate but short-term, do not be surprised if the main beneficiaries of economic uncertainty are the largest incumbent banks.