Retail Banks – Customer Defection
A recent report from the consulting company CG42 highlights the vulnerability to retail banking of customer defection. It provides real cause for concern and mirrors a previous study from Bain and Company who found the defection rate to be 27%. The headline here was:
When Bain & Company surveyed 83,000 consumers in 22 countries between July and November 2014, we found that more than one-third of them bought a banking product from their primary bank’s competitors during the past year. Among the 17,600 respondents in the U.S., the defection rate was lower, but still a substantial 27%.
The June 2018 from CG42 used over 4,000 responses in its survey and features all the major retail banks. Specifically included are Bank of America, Citibank, Chase, Capital One, BB&T, SunTrust, U.S. Bank, and Wells Fargo.
The report’s conclusion is bleak – in fact:
The Stakes Have Never Been Higher
By stakes, they proceed to highlight the specifics in terms of the financial risk.
If existing customer frustrations are not addressed, the top ten retail banks calculate to lose over $16 billion of revenue in the next 12 months: In particular, this number projects over 10% of all their retail customers will defect.
Customer Defection Causes
The study highlighted current customer frustrations that are causing them to consider defection. In more detail, this means the customer is going to reduce their investments and consider alternatives such as online banking or moving to a competitor. In more detail, their list of annoyances include:
- The bank engaging in dishonest, unethical or illegal practices
- Being nickeled and dimed with incidental charges
- Not offering competitive rates and/or pricing
- Having personal or account information compromised/put at risk
- Being hit with overdraft charges
- Experiencing bad service