Banks Alienate Customers By Raising Fees: Study
A rise in fees has led to growing dissatisfaction with retail banks, which may be sacrificing long term growth in favor of short-term gains, J.D. Power and Associates said in a study.
Customer satisfaction with retail banks dropped 26 points on a 1,000-point scale to 737 from the year before, according to the survey of nearly 20,000 households, conducted by the consumer study arm of McGraw-Hill.
While the current financial crisis has bruised the image of retail banks, it is cost-cutting and increased fees that have largely contributed to falling consumer sentiment, the study found.
"Some of the key drivers of customer satisfaction, such as the percent of transaction problems, fees, and wait time for tellers and phone service are going the wrong direction," Rockwell Clancy, executive director of financial services at J.D. Power and Associates, said in an interview.
Faced with the collapse of home values and the credit crisis, banks have cut personnel and increased transaction charges to meet shareholder demands.
"Typically when financial institutions are under a crunch, with loan volumes going down and charge-offs going up, banks raise fees and reduce staff to make their numbers," Clancy said.
Among the highest rated retail bankers, Commerce Bank received the top spot in the Mid-Atlantic and Midwest regions, while BancorpSouth Inc was rated highest in the Southeast.
Wachovia Bank was ranked first in the Southwest, and Bank of the West led the Western region of the country.
Banks that resist the urge to cut costs and retain a high level of customer service could reap financial rewards in the future, J.D. Power said.
According to the study, a bank that increased the number of highly committed customers -- people with a strong emotional attachment to the brand -- by 5 percent saw overall deposits grow as much as 3 percent annually.
"The focus on customer satisfaction can sometimes be considered as a discretionary expense when in fact it's the real differentiator in financial performance," Clancy said.