Getting Consumers To Switch Banks

Bank Systems & Technology reported on a study conducted by Harris Interactive on behalf of Xerox which found that:

“Americans said that although they’re not unhappy with their financial institution, many would switch banks given the right incentive. Of those who currently use a bank/FI…22% say they are satisfied but would switch banks with the right offer/incentive and 5% say they are dissatisfied and looking/willing to look for a new bank.”

That begs the question: What is the right offer/incentive to get that 22% to switch?

According to Compete, that might not be the lowest fees or best rates. According to their data, more than half of…whatever population they’re tracking…said “convenient location or ATM” was the reason they chose their primary bank. Less than one in five said “lowest account fees” or “best interest rate.”

But wait, that might not be right. Because JD Power and Associates says that:

“Consumers shopping for a new bank put more importance on a bank’s brand image than on the location of branches, the products and services offered, or the recommendations of others.”

On the other hand, a study from Acton Market Intelligence revealed that:

“Consumers rate People — the financial institution’s frontline staff, client service representatives, and senior level executives — as the most influential factor in their decisions to choose a certain bank or credit union for their primary banking services.”

But a closer look at that study shows that while 71% of people rated People as being “critical/very important”, 68% rated Products/Services as being critical/very important, and 66% rated Image/Community as being critical/very important. So yes, People is most important — but not by much.

Interestingly (to me at least), was that none of the aforementioned sources cited “service” as a particularly important factor. Oh sure, you could say that People in the Acton study referred to service, but I’d argue that service is a lot more than just people. For those of you at FIs competing on the basis of your (often self-perceived) superior service, you might want to take a look at, who concluded that “service, security [are] key issues when picking banks.”

So, if you would be so kind, please explain me something: Who’s right?


6 thoughts on “Getting Consumers To Switch Banks

  1. I think it’s time for a quantitative approach (ugh can’t believe I am saying this) using algorithims to load the complex variables that we as humans cannot calculate in our heads. Kidding aside – demographics and mobile banking should be included in any study of this sort. Cheers.


  2. There’s a difference between an “offer/incentive” and things like branch/ATM convenience, staff, security and service which are enduring qualities attached to a financial institution’s reputation. These factors may influence someone’s decision regardless of whether or not an offer/incentive is available. You could bribe people with $500 to switch to Bank X. That’s an offer/incentive. Other factors may still apply.

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  4. Ron,

    Long time reader, first time replier.

    There are a lot of things going on in our industry when it comes to switching banks. I’ll make this a potpourri response addressing several items you bring up:

    1. 22% of respondents saying that they are satisfied but willing to switch is a great indicator that most people aren’t very emotionally invested in their bank. Why would they be? Most don’t treat the consumer as an individual even though most would say that service is how they stand out. I don’t think this is exclusive to our industry because it’s been a long time since I’ve heard anybody talk about an outstanding customer service experience in retail, hospitality, or most any other industry. With the holidays now here, I’d imagine stress levels won’t help that much. The 22% are simply saying that they’ve thought about switching but something is going to have to be a tipping point. People always love free stuff as a way to tip them over.

    2. I’m not sure how JD is going to claim that brand image is the top factor except to say that they are usually rating consumer sentiment about their own bank or other FS relationship and then applying those thoughts to a prospective new bank.

    3. In response to the “Consumers rate People” argument, I’ll note that people first have to become a customer to really experience a bank’s people or service. Good products give you the right to do good marketing, which will in turn allow you the chance to earn a customer’s continued and repeat business with your level of service and quality people. I don’t think that progression can be inverted in any industry.

    4. Finally, I’m always skeptical of surveys and the qualitative data. Joe is right, we need the data to separate our own actual behaviors from our desired behaviors or perceived rationality.

    Great blog…keep em coming!

    – mark zmarzly @BankMarketing

  5. Mark: Thanks for (finally) commenting. 🙂

    I wrote this to demonstrate how widely divergent the data is regarding how consumers choose banks and decide whether or not to stay with them. Personally, I think that the next firm that publishes a research study showing that “branch locations” is the #1 factor in selecting a bank should have to join Julian Assange in hiding.

    To your points:

    1. Your point about the 22% is right on. But I would take it further. Many of those customers in the 73% group (22% said open to incentive, 5% said looking) aren’t emotionally invested either. Many of them simply don’t care enough about banking, or maybe even managing their finances to care that their bank sucks (if indeed it does).

    2. I imagine that JDP constructed a survey in which “brand” ended being the top factor. This could be because: a) certain factors were not prompted for, and/or b) other factors will split out in ways that the % of respondents citing those factors were smaller than the “brand” factor.

    3. Agreed.

    4. I’m always skeptical of surveys, as well. Well… OTHER firms’ surveys. Not mine, of course. 🙂 And, as I’m sure you know, Joe is always right.

  6. Maybe the answer is simpler. Whenever I see a survey the first thing I look at is who paid or it. Questions are worded carefully and can support many positions depending on how they are worded. The result is something that is far from statistically relevant.

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