Retail Bank Customers Seek Better Rates As Satisfaction Plateaus

According to the J.D. Power 2023 U.S. National Banking Satisfaction Study^SM, higher interest rates created some momentum last year among customers opening more products with their primary bank, especially CDs. But the data also signals storm clouds ahead: Customers are increasingly opening deposit accounts with alternative organizations, such as online banks, wealth management firms and other non-bank competitors, drawn not only by higher rates but better experiences.

This has driven a diversification of the providers used by most consumers, and accelerated a ‘silent attrition’ from legacy banks and credit unions. Nearly all banks are losing wallet share as customers open secondary accounts.

In other words, the banking industry is at an inflection point where traditional banks must up their game — or risk losing customers or weakened relationships.

The J.D. Power study provides a view of the retail banking customer experience for nine national banks in the United States with domestic deposits exceeding $300 billion and at least 200 branches. It evaluates bank customer experience across seven factors: trust; people; account offerings; allowing customers to bank how and when they want; saving time and money; digital channels; and resolving problems or complaints.

Capital One ranked highest in overall satisfaction for a fourth consecutive year, with a score of 706. Chase (674) ranked second and TD Bank (661) ranked third.

Capital One Dominates National Banks in Satisfaction:

Capital One received the top score in six of seven dimensions and is the only bank to improve every year since 2020 (+18 points since 2020).

Rates Matter, But Experience Is Key

Higher rates clearly matter. Among those not happy with the rates they are getting on deposit accounts at their primary bank, 47% of ‘financially healthy’ consumers say they have considered moving balances and 60% already have secondary checking/savings accounts to get better yields. Both of these numbers have increased significantly over the past two years.

However, better rates alone won’t deepen relationships. The study shows that banks with a greater share of a customer’s deposits are more likely to have very loyal customers who plan to reuse them and recommend them to others. While rates are a contributing factor, the biggest drivers of relationship stability are an easy, seamless experience and effectively meeting customer needs.

Specifically, banks that retain a larger share of customer deposits are more likely to be perceived as easy to do business with. (Granted, this could be a case of ‘the chicken or the egg’, but the correlations is strong.) This includes superior mobile experiences where customers find the app very easy to use and understand. It also includes the ability to open new accounts and credit cards quickly and smoothly.

These banks also outperform in understanding and meeting customer needs — from relevant account offerings to instilling confidence that the bank can handle all of a customer’s financial life. Showing that you understand a customer’s unique financial situation breeds trust, loyalty and revenues.

“Deposit interest rates surely matter, but there are steps large banks can take to help minimize the deposit flow to secondary providers,” said Paul McAdam, senior director of banking and payments intelligence at J.D. Power. “Customers want banks to help them grow their money and save them time. Banks that ensure the banking process is easy for their customers are more likely to retain deposits, particularly among customers who have balances greater than $10,000.”

In essence, moving money is easier than ever, so once you earn a customer’s business you have to make banking effortless and demonstrate that you can meet their needs. Do this effectively, and you reduce the incentives for them to move money to accounts elsewhere, regardless of rates.

Digital and Human Experiences Still Disappoint

While “digital channels” is the only dimension of customer experience that has improved since 2020, the change over time has been modest at best when considering the investment of time and money in digital. Of bigger concern is that qualities like “empathy” (helping save time and money) and “resolving problems” show some of the lowest satisfaction numbers.

This spells trouble ahead for banks of all sizes. Even as more routine transactions occur on mobile devices and websites, the “moments of truth” happen during live interactions, when there are significant issues to resolve or major financial decisions to be made. The implied contract is that while digital should handle simple tasks flawlessly, for more complex issues a knowledgeable professional will have your back.

The bad news is that consumers simply do not believe this support is there.

Right now, banks are falling short on both fronts — struggling to deliver effortless digital experiences while also failing to provide reassuring human guidance when consumers need it. Banks must make game-changing investments to reinvent mobile experiences and close gaps — or risk customer defections in the years ahead.

Read more on the power of customer satisfaction and engagement in banking:

Seizing the Experience Imperative

In today’s environment, retail banks must rethink traditional notions of loyalty and trust. Increased rates help capture deposits and products in the short-term, but are easily matched. As this study shows, earning an outsized share of customer deposits and products hinges on experience excellence — both digitally and human centered.

Right now, large banks as a category trail competitors in both. But this also creates an opening for those banks willing to lean into experience innovation as a core strategy. As Capital One has shown, it is still possible to outpace peers and emerge as a recognized customer champion. But more banks must view experience transformation as an urgent business priority rather than a “nice to have” investment.

The stakes will only grow larger if economic uncertainty causes more customers to reevaluate their primary banking relationship. At such moments of truth, consumers naturally gravitate to providers they trust to seamlessly address needs and simplify money matters via any channel. This makes experience excellence the battleground that will determine winners and losers over the next decade.

Banks that transform experiences fastest stand the best chance of deepening loyalty amidst digital disruption. Those unable or unwilling to adapt also stand the most to lose if they fail customers during moments of anxiety and need.