Trust in Retail Banks Is Strong; Fake Accounts Not Pervasive, J.D. Power Finds
Banks Need to Focus on Fee Transparency and Reduce Sales Pressure
COSTA MESA, Calif.: 7 Sept. 2017 — Retail banks have earned the trust of their customers, who believe banks help them find the right product based on their financial needs, according to the J.D. Power 2017 U.S. Banking Sales Practices and Advice Study. The inaugural study gauges the effect of retail bank sales practices and financial advice on overall customer satisfaction across the 23 largest banks in the United States. While unauthorized accounts opened by banks are a serious issue, the study finds such occurrences to be rare. More common issues that destroy trust are customers feeling pressured to open an account and being surprised by fees after opening an account.
“When it comes to the most fundamental issues in a retail banking relationship—customers trusting their bank to do the right thing and to act ethically—U.S. retail banks get a clean bill of health,” said Jim Miller, Senior Director of Retail Banking Services at J.D. Power. “But there are still areas where the perception of overly aggressive sales practices and surprise fees are having a negative influence on overall customer satisfaction. This creates a unique opportunity for retail banks to stop selling so hard and to start offering tailored financial advice, which can improve customer satisfaction and solidify the strong trust base that has already been built.”
Following are key findings of the study:
- Customers trust their banks and believe they act ethically: Among retail bank customers, 85% say they either “somewhat agree” or “strongly agree” that they trust their bank to do the right thing, and 79% say they believe their bank acts ethically. In-depth analysis shows that a statistically insignificant proportion of customers—less than 0.1%—had an unauthorized account opened by their bank in the past year.
- Pressure to open new accounts persists with deleterious effect: When opening a new account, 9% of bank customers indicate they felt sales pressure from bank representatives. Of those, 16% say the pressure was significant. Overall satisfaction scores are 71 index points higher (on a 1,000-point scale) among customers who did not feel pressured by a representative when opening a new account, compared with those who did feel pressured.
- Customers surprised by fees are less satisfied: When it comes to fees, 13% of bank customers indicate being surprised by fees associated with a new account. Overall satisfaction scores are 110 index points higher among customers who were not surprised by fees when opening a new account vs. those who were surprised. Fee surprises also destroy trust. Among customers who were not surprised by a fee, 56% say they “strongly agree” that they trust their bank to do the right thing, but drops to 31% among those who were surprised by a fee.
- Fee transparency and customer engagement lead to higher satisfaction: When bank representatives completely explain fees up front, the frequency of fee-related surprises drops to 7%. Likewise, when representatives ask questions before suggesting a new account, overall satisfaction increases 75 index points and overall levels of trust increase by 17 percentage points.
- Advice—not sales—is key to greater satisfaction and loyalty: Among customers who received financial advice from their retail bank, 60% indicate they acted on it and roughly 60% of those customers say they opened a new account as a result of the advice. Overall satisfaction scores are 70 index points higher when bank customers receive financial advice, with 96% of those who received financial advice saying they either “probably will” or “definitely will” use the same financial institution the next time they need a bank account or product.
About the Study
The inaugural 2017 U.S. Banking Sales Practices and Advice Study measures customer satisfaction among retail bank customers of the 23 largest U.S. banks who have opened a new account in the past year with a bank representative; received financial advice in the past year from a bank representative; and customers who said they had an account opened without their consent in the past year. The study is based on responses from 22,208 retail bank customers and was fielded in June 2017.
Banks included in the study are Bank of America; Bank of the West; BB&T; BBVA Compass; BMO Harris; Capital One; Chase; Citibank; Citizens; Comerica; Fifth Third; HSBC; Huntington; KeyBank; M&T Bank; PNC; Regions; Santander; SunTrust; TD Bank; Union Bank; U.S. Bank; and Wells Fargo.
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 is headquartered in Costa Mesa, Calif., and has offices serving North/South America, Asia Pacific and Europe. J.D. Power is a portfolio company of XIO Group, a global alternative investments and private equity firm headquartered in London, and is led by its four founders: Athene Li, Joseph Pacini, Murphy Qiao and Carsten Geyer.
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