Big 4 Banks Risk Massive Customer Defections as Digital Satisfaction Plummets and Trust Issues Persist, J.D. Power Finds
ING (Non Majors) and Commonwealth Bank of Australia (Majors) Top the Rankings in Retail Banking Satisfaction in Australia
SYDNEY: 19 Nov. 2019 — Retail banking customer satisfaction in Australia shows that in spite of a modest 8-point year-over-year increase to 757 points (on a 1,000-point scale), the industry continues to struggle, according to the J.D. Power 2019 Australia Retail Banking Satisfaction Study,SM released today.
Below the surface, the results show significant problems for the industry. While customers are demanding more digital capabilities, banks are moving in the wrong direction. Satisfaction with mobile apps has dropped 27 points since 2018 and online banking has declined by 25 points. A key advantage for the Big 4 banks is the ability to leverage their scale to provide a superior digital experience, but the Big 4 trail their smaller rivals not constrained by legacy platforms. Big 4 mobile satisfaction has dropped 21 points to 782, behind the Direct Banks’ average mobile satisfaction of 822 points. This opens the door to increased competition, especially from existing direct banks and new virtual banks (neo-banks) entering the market. ING, a direct bank, not only leads the industry in overall satisfaction, scoring a significant 114 points higher than the Big 4 average, but also scores higher than the Big 4 banks in mobile by 78 points and in online by 73 points. While the Big 4 have improved in fee satisfaction, they still trail ING by 196 points.
Nine months after the final report of the Australian Royal Commission into the banking industry and the significant negative media attention on banks, there has been only a minor gain in customer trust of the Big 4 banks. The proportion of Big 4 customers who say they completely trust their bank has improved only slightly since 2018, from 58% to 62%. The bright spots for banks include a 35-point increase in fee satisfaction and major improvements in problem resolution, increasing by 134 points from a notably low 575 in 2018 to 709 in 2019.
The study finds that 8% of customers in Australia have switched banks in the past 12 months. This compares poorly to other countries, as only 4% of customers in the U.S. and 5% in Canada have switched banks. The findings point to underlying issues beyond trust, as the top three reasons for switching banks (in the past 12 months) are: interest rates not competitive (30%); poor service experience (23%); and high fees for products and services (20%).
“Fortunately for the banks, it is a hassle to switch banks. Nearly one-in-four (24%) Big 4 customers remain with their bank because they feel it is too troublesome to switch,” said Bronwyn Gill, Head of Global Business Intelligence at J.D. Power. “The upcoming introduction of Open Banking and Direct Debit transfer changes, along with declining digital satisfaction, could open the door to new competitors and lead to massive defections. The challenge for the industry creates an opportunity for some banks to pick up market share. Customers will flock to those banks which offer a superior digital experience, underpinned by trust and a deeper customer relationship.”
Ahead of open banking being rolled out more extensively, reassurance of customer data security is critical, as the study finds that less than half (49%) of Big 4 customers perceive that their personal data/information is very secure with their bank. This is also likely why only 12% of bank customers in Australia have authorised a third party to have access to their financial data in the past 12 months.
Following are key findings of the 2019 study:
- Comparison of bank’s customer satisfaction is important: When choosing their primary bank, 71% of customers say it is very important/important to know how a bank’s overall customer satisfaction compares with other banks.
- Increasing receptiveness to virtual banking: Australians are increasingly receptive to opening an account with a virtual bank, with 37% of customers saying they would definitely/probably open an account with a virtual bank (neo-bank), up from 32% in 2018.
- Problem resolution via call centres is down: Customer contact with call centres has dropped from 67% last year to 57%, placing greater pressure on branches to interact with customers when they experience problems.
- Little awareness of Osko fast payment service: Nearly two-thirds (61%) of customers are not aware of this new fast payment service and only 20% of customers have used it. Awareness is highest among Generation Y and Z, with 53% of customers in these age groups aware of this service.
ING ranks highest among non-major banks in retail banking satisfaction with a score of 852. Commonwealth Bank ranks highest among the major banks with a score of 749.
The Australia Retail Banking Satisfaction Study measures customer satisfaction with the products and services provided by their primary financial institution. The study measures overall satisfaction in six key factors (in order of importance): account activities (35%); fees (16%); product offerings (15%); account information (15%); facility (12%); and problem resolution (7%).
The 2019 Australia Retail Banking Satisfaction Study is based on responses from 4,834 retail banking customers. Now in its fourth year, the study includes 26 major retail banks in the market, 17 of which are rank eligible, and scores are based on customers’ experiences with their primary bank. The study was fielded in September-October 2019. In addition to Australia, J.D. Power also conducts retail banking studies across key financial markets that include Canada, Hong Kong, Japan, Singapore and the United States.
Media Relations Contacts
Shahilia Bhagat; J.D. Power; Singapore; 65-3165-0120; [email protected]
Geno Effler; J.D. Power; Costa Mesa, Calif., USA; 001-714-621-6224; [email protected]
J.D. Power is a global leader in consumer insights, advisory services and data and analytics. These capabilities enable J.D. Power to help its clients drive customer satisfaction, growth and profitability. Established in 1968, J.D. Power has offices serving North America, South America, Asia Pacific and Europe.
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 J.D. Power defines Generation Y as individuals born 1977-1994 and Generation Z as born 1995-2004.