WESTLAKE VILLAGE, Calif., June 24 /PRNewswire/ -- Large national banks capture a higher proportion of prospective customers compared with regional banks, according to the J.D. Power and Associates 2010 U.S. Retail Bank New Account Study(SM) released today.
The study examines the bank shopping and selection process, as well as customer satisfaction with the account initiation and on-boarding process.
The study finds that on average, large national banks acquire 70 percent of prospective shoppers who considered using them for a new account or new primary financial institution, while regional banks secure only 59 percent of these shoppers.
The higher capture rate among large national banks is impacted by the use of promotional gifts and attractive short-term interest rates. Among customers who opened up a new account with a large national bank, 24 percent say that their primary reason for selecting that bank was because of a promotional gift/cash award or an attractive short-term interest rate, compared with just 13 percent of regional bank customers. However, 24 percent of these customers say that they "definitely will" or "probably will" switch banks again in the next 12 months, while just 13 percent of customers who selected a bank for another reason (such as branch proximity or a positive recommendation) say the same.
"While offering a promotional gift, cash award or an attractive short-term interest rate may lead to increased selection by customers, it's important to keep in mind that the increased selection rate doesn't necessarily lead to an increased retention rate," said Michael Beird, director of the banking practice at J.D. Power and Associates. "The short-term boost in acquiring customers can become a retention challenge in the long run."
Among customers who completely avoid a particular financial institution in their shopping process, brand image is the leading driver. Large national banks experience a higher avoidance rate among potential customers than regional banks (11% vs. 7%), partially as a result of unfavorable reputations and perceived financial instability. Poor service experiences and bank policies, particularly those related to high rates and fees, are also main reasons for avoidance of both large national and regional banks.
"The recent turmoil in the banking sector has had a major impact on brand image, particularly among the larger banks," said Beird. "As a result, it's important that banks provide top-notch service to help to lessen these effects and provide a boost to their brand image."
J.D. Power and Associates offers the following tips to consumers who are selecting a bank:
- Convenience: Look for locations convenient to home or work, as well as hours that fit one's personal schedule. Also, consider locations of bank ATMs that can be used "fee-free."
- Online resources: A majority of bank customers now prefer conducting transactions online rather than at physical branches. Review online banking sites to find if they're user-friendly and offer a wide range of services.
- Products and services: Consumers should not assume that all bank products and services are the same. Ask questions and gather information about benefits, fees and limitations associated with offerings that align to one's lifestyle.
- Cost of services: While some bank services are still free, consumers should find out what actions might trigger service charges or fees and how those costs can be avoided through advance planning. Also, be aware that starting in July 2010, rules for overdraft coverage and associated fees require customers to sign up, or "opt-in," for programs that permit banks to pay overdrafts in exchange for a fee.
- Overall satisfaction: Consumers can go online to assess third-party ratings of banks and customer satisfaction to see how specific institutions rank compared to their competition. J.D. Power and Associates offers ratings of banks by geographic region, available at www.jdpower.com/finance.
The 2010 Retail Bank New Account Study is based on responses from 3,770 consumers who shopped for a new banking account or new primary financial institution during the past 12 months. The study was fielded in March and April 2010, and includes five large national banks (Bank of America, Chase, Citibank, Wachovia and Wells Fargo) and 16 regional banks (Branch Banking & Trust, Capital One, Citizens Bank, Comerica Bank, Fifth Third Bank, HSBC, KeyBank, M&T Bank, National City, PNC Bank, Regions Bank, Sovereign Bank, SunTrust Bank, TD Bank, U.S. Bank and Union Bank).
About J.D. Power and Associates
Headquartered in Westlake Village, Calif., J.D. Power and Associates is a global marketing information services company operating in key business sectors including market research, forecasting, performance improvement, Web intelligence and customer satisfaction. The company's quality and satisfaction measurements are based on responses from millions of consumers annually. For more information on car reviews and ratings, car insurance, health insurance, cell phone ratings, and more, please visit JDPower.com. J.D. Power and Associates is a business unit of The McGraw-Hill Companies.
About The McGraw-Hill Companies
Founded in 1888, The McGraw-Hill Companies (NYSE: MHP) is a global information and education company providing knowledge, insights and analysis in the financial, education and business information sectors through leading brands including Standard & Poor's, McGraw-Hill Education, Platts, and J.D. Power and Associates. The Corporation has more than 280 offices in 40 countries. Sales in 2009 were $5.95 billion. Additional information is available at http://www.mcgraw-hill.com/.
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SOURCE J.D. Power and Associates