The Big Four Banks Are Losing Out On Customer Satisfaction

by Trefis Team
JPMorgan Chase
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It is not just the regulators who think that the bigger the bank, the more the problems. Customers across the country seem to harbor the same belief as is evidenced by the American Customer Satisfaction Index (ACSI) scores for the financial sector released earlier this week. [1] Customers are apparently happier doing business with small, regional banks than with the big-wigs JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C), Wells Fargo (NYSE:WFC) and Bank of America (NYSE:BAC). In fact, the numbers reveal that customers are altogether more satisfied with the banking services provided by credit unions than those by the banks.

While the scores point to an overall negative attitude towards the big banks – a situation aggravated since the global economic downturn of 2008 – JPMorgan has done quite well to consistently improve its ratings to end Wells Fargo’s 11-year dominance at the top. On the flip side, the fact that Bank of America is worse off in the eyes of its customers today than it was in 2009 is surely a cause for concern.

See our complete analysis for JPMorgan Chase | Wells Fargo | Citigroup | Bank of America

The country’s biggest banking institutions have found themselves running low on customer confidence for quite some time now with their attempts to make up for lost revenues with higher fees and charges not going down too well with customers, who were already wary of them following their multi-billion dollar government bailouts during the economic downturn of 2008. But even as they continue to be bogged down by problems stemming from that period, they have worked hard over recent years to give their image among customers a face-lift.

And they have done reasonably well too, going by the numbers compiled as part of the annual American Customer Satisfaction Index (ACSI). Except for Bank of America, the big banks had higher ACSI scores for 2012 than they did for 2011, with JPMorgan showing the best improvement in the last three years. [1] Bank of America, which continues to fight legacy mortgage issues and revamp its business model under the Project New BAC, still faces strong headwinds in its attempt to win over customers (see Bank of America Speeds Up Cuts With Project New BAC).

So do the ACSI scores really matter to the banks? They no doubt do to a great extent as they are one of the most reliable index for identifying customer satisfaction across 230 companies in 47 industries. And any significant increase or decrease in the index over a few years for a particular company means that customers have reacted favorably or adversely to events over the period.

To better understand this point, let’s take the example of Wells Fargo. The banking group, which is the smallest in terms of assets among the four banks mentioned here, has been at the top of list for more than a decade from 2001 to 2011 – considering Wachovia’s top rank from 2001 to 2008 before it was acquired by Wells Fargo in 2009. Over this period, the size of the bank’s deposits swelled considerably as can be seen from the chart above. After all, the banking industry thrives on customer trust, and only when a customer is satisfied with a bank’s service will the person trust it with his/her savings. It is therefore no surprise that in comparison Bank of America has shown slower growth in its deposits base over the same period – shown in the chart below.

But the gap between the index figures for the big banks and small banks as well as credit unions does mean that there is more the globally diversified banks can do to get their customers onboard.

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  1. December 2012 ACSI Scores, ACSI Website [] []
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