Why Banks Could Lose Their Edge in Personal Loans — and How to Keep It

By Bruce Gehrke, director of lending intelligence at JD Power

Published on July 27th, 2026 in Loan Growth

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As the overall financial health of Americans continues to stagnate, consumers are taking on more debt to patch their finances.

In May, Americans had over $5 trillion in outstanding credit card debt, often spread over multiple cards. So it should come as no surprise that consumers are looking for ways to consolidate that debt, which has led many to personal loans.

The JD Power 2026 U.S. Consumer Lending Satisfaction Study found that overall satisfaction with personal loans rose to 706, which is up 2 points year over year. (The ratings are on a 1,000- point scale.) On the surface, the trend looks straightforward: Customers need money and they’re happy once they get it.

What banks are missing: Beneath the surface, the ground is shifting fast. Competition is heating up between traditional banks and nonbank lenders to service these unsecured personal loan customers.

For now, the legacy brands are winning. Banks still lead among lenders on aggregate satisfaction and loyalty. But nonbanks are closing the gap across every experience dimension — and they’re doing it while serving a more financially vulnerable borrower.

Momentum is building for nonbanks, and to compete, banks have to resist complacency and understand what today’s personal loan customer values.

Key insight: A stable industry-level customer satisfaction score hides a 14-point swing in competitive momentum. Banks aren’t losing on the scoreboard — yet. They’re losing on the trajectory. Loyalty is the lagging indicator that will be the last thing to show a shift.

Need to Know:

Nonbanks gained +11 points in overall satisfaction while banks lost 3, a 14-point momentum swing.
Banks still lead where it counts today: a 12-point edge in repurchase intent (67% vs. 55%) and a 23-point Net Promoter Score lead (51 vs. 28).
Trust is the most dynamic and important consumer preference: nonbanks surged +17 points while banks slipped 3.
Speed is now table stakes: Satisfaction falls 41 points when approval takes more than an hour and 47 points when funding takes longer than a day.
Banks’ customer mix grew financially healthier this year, yet satisfaction still declined, so portfolio composition is not an excuse.

While a quick glance at the lending landscape would indicate that the market is stable, a closer look at the data says that customer priorities are quietly shifting in meaningful and potentially disruptive ways. Nonbank lenders, who now hold the majority of unsecured personal loan balances, have momentum and banks can’t be lulled into a false sense of security by their current satisfaction and loyalty metrics.

Don’t Confuse a Current Loyalty Lead With a Durable One

Traditional banks’ loyalty advantage is real, but it’s also fragile.

Two-thirds (67%) of bank borrowers say they’ll definitely reuse their lender, and the average bank Net Promoter Score sits 23 points ahead of nonbanks. But loyalty reflects yesterday’s experience. (Net Promoter Score is a registered trademark of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.)

Satisfaction momentum is a leading indicator of what’s to come, and it has already begun to shift to nonbanks. This disconnect between strong current loyalty and declining satisfaction trends is exactly how customer erosion begins.

Why it matters: Institutions that assume their loyalty base is stable are the last to see the shift coming. Loyalty buys time, not immunity.

In order to accurately capture real customer intentions, bank brands need to start looking at a new set of criteria:

Evaluate satisfaction momentum (year-over-year dimension changes), not just static scores. This helps to catch erosion before it hits retention.
Segment the at-risk customer base by both satisfaction gaps and cross-product exposure to prioritize high-value relationships, uncovering early vulnerability.
Build retention offers aimed at the dimensions of trust, digital access, and ease of doing business. This is where nonbanks are gaining most quickly.

Bottom line: Treat your loyalty lead as a runway, not a moat, and use it to close the momentum gap now.

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Lock Down Trust Before It Becomes Nonbanks’ Stronghold

Trust is the key differentiator for nonbanks. In fact, trust represented the single largest competitive gap in the study: nonbanks up 17 points, banks down 3.

That’s striking given that nonbanks serve a structurally riskier borrower.

This signals that trust in lending is being redefined around transparency and clarity, not institutional heritage, and that banks are ceding that narrative.

Key insight: Fully explaining fees drives a 142-point increase in overall satisfaction, one of the most powerful trust levers in the entire study, and one the banks control completely.

Here’s how to expand on this:

Proactively set expectations on fees and process steps up front. “No surprises” is now a competitive advantage.
Audit origination-fee communication. Fees hurt satisfaction far less when they’re clearly understood before approval.
Reframe documentation thoroughness as reassurance and set the proper expectations. Process rigor lifts overall satisfaction when expectations are met.

Bottom line: Trust is earned in the fine print. Make fee and process transparency a deliberate experience, not a compliance afterthought.

Win the Shopping Moment You Currently Can’t See

Bank borrowers are still discovering loans through the bank relationship, but 53% now start with a general internet search. What’s more, nonbank borrowers are more than twice as likely to begin on third-party comparison sites. With 74% of nonbank borrowers submitting two or more applications, shopping has become an open, competitive auction.

All that means banks that are relying solely on branch or relationship discovery are invisible at this exact moment when customers are considering their loan options.

Why this matters: If you’re not present in search and comparison channels early, you’re not losing the deal at underwriting. You’re losing it before the application ever reaches you.

Steps to take:

Optimize digital discovery and pre-qualification where more than half of borrowers now begin.
Compete on comparison platforms with clear, rate-forward messaging rather than defaulting to direct-only strategies.
Streamline multi-application friction so comparison shoppers can complete the process quickly to cut down the risk of mid-funnel abandonment.

Bottom line: The shopping funnel has moved off your website. Meet borrowers in search and aggregators or forfeit the consideration set.

Turn Speed and the Human Touch into Your Signature Advantages

Here’s the good news for banks: Power remains in the personal touch.

In fact, bank representative interactions add seven points to customers’ overall satisfaction scores. Conversely, nonbank representatives erode satisfaction by 36 points. Where nonbanks are beating banks is on speed, funding 68% of loans within a day versus banks’ 58%.

If banks can turn things around, and start to beat nonbanks on speed, their advantage on quality assistance will help them reverse the current trend.

Key Insight: The 43-point swing between bank and nonbank rep effectiveness proves execution beats channel strategy. Trained bank representatives are a moat that nonbanks cannot easily copy.

How to improve things here:

Close the funding-speed gap. Delays past one day cost 47 satisfaction points no matter how good the rest of the experience is.
Enable representatives to resolve. Deploy them at high-stakes moments like final approval where they can demonstrably lift satisfaction.
Benchmark approval and funding times against nonbank competitors quarterly and treat sub-one-hour approval as the target, not the exception.

Bottom line: Combine nonbank speed with superior human execution and you convert a defensive position into a differentiator that nonbanks cannot match.

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No More Excuses

It’s tempting to attribute banks’ satisfaction edge to portfolio composition, since financially healthy borrowers have an overall satisfaction score of 796 versus 636 for financially vulnerable ones — a 160-point gap. However, the mix of bank customers actually became healthier this year, with an increase of 3 points in financially healthy customers, but satisfaction still fell 3 points.

The decline is about service delivery, not who is being served.

Why this matters: Nonbanks are being graded on a tougher, more vulnerable customer base and yet are still gaining. Banks can no longer hide behind demographics.

Here’s how to fix this:

Separate customer headwinds from true performance changes in your reporting to uncover the real signals.
Benchmark against 20-plus competitors across all dimensions of satisfaction to locate specific, addressable gaps.
Direct investment toward the key moments, trust, fee clarity, funding speed, and assisted interactions, where performance, not customer mix, drives the score.

Bottom line: A favorable customer mix can inflate the appearance of health. Strip it out and fix the experience gaps it’s concealing.

The Bottom Line for Bank Lenders

Banks boast the assets that matter most to customers. They have years of institutional knowledge that drive built-in loyalty, trained people to service customers’ loans, and the ability to fund loans quickly.

But these current advantages won’t last if leaders read the flat industry score as permission to wait.

Banks need to understand the current momentum instead of position, prioritize transparency and human execution, and show up in the digital shopping moment.

The banks that navigate this transition effectively will be able to hold off the charge of nonbanks and lock in their market advantages before they erode any further.