Part
01
of one
Part
01
Why do people switch banks?Switching is difficult/ annoying. So why do they move? So separate from a life event (a move or a first job dictating a need for a checking account) what precipitates a move? Most regional banks get new accounts from the large banks. What are customers not getting from a large bank that they think they'll get from a local or regional bank? And don't say friendly service. If technology is replacing brick & mortar, smiling tellers are not the reason.
Hello! Thank you for your question about why people switch banks. The short answer is that the top five reasons for switching banks are good competitive pricing (39%), high-quality customer service (34%), good value for money (32%), high-quality product/services (24%), and easy to do business with (18%). Millennials have the highest likelihood of switching banks, according to research. Below you will find a deep dive into our findings.
METHODOLOGY
We started our research by reviewing industry reports, research articles, surveys and other trusted media sites to find information on the reasons people switch banks. We focused on restricting our search to the latest available sources in order to have updated information on the subject. Our research includes statistical data to support all findings. The most useful resources that provided all relevant information are The Financial Brand, FICO and Accenture Strategy report.
OVERVIEW
Studies have shown that smaller banks, especially regional banks, have more satisfied customers than the larger financial institutions because they provide more customized service both online and in their branches. According to the Credio survey, 31% of overall banking satisfaction was due to mobile and online tools, 29% was due to customer support and 27% was due to ATM and branch availability. The most common reasons for switching banks are customer service satisfaction, availability of account types and online banking satisfaction, all of which ties back to the convenience and ease of use for customers.
REASONS FOR SWITCHING BANKS
In recent years, banking has become one of the most disrupted industries due to digital technologies. According to the Accenture Strategy Report, the top three factors that influence customers to switch to other banks (mostly regional) are good competitive pricing of products, high-quality customer service, and good value for money. Of the surveyed consumers who switched to another bank due to unsatisfactory services, over 80% claimed they would have continued if their problems were resolved on their first contact with the provider. This reason remained as the most frustrating factor for customers over the past 5 years.
The following are the results of the survey conducted by Accenture Global Consumer Pulse Research with over 2984 retail banking customers who switched completely to a different bank.
Based on another study conducted by Sells Agency, apart from reasons of life circumstances, 20% of those surveyed said they switched to a different bank because of overall dissatisfaction. 6.8% claimed to have switched because of the inconvenient location and only 3.5% said they were influenced by the products of their new bank.
Customers who are evaluating and looking for a new bank, make their decisions based on branch convenience, promotional offers, past personal interactions, products/services, customer experience, recommendations, and bank reputation. It was found that interest rates and fees do not carry much weight in influencing the purchase decisions of a customer.
IMPACT OF MILLENNIALS TOWARDS HIGH CHURN RATE
Based on FICO’s consumer research on “why people switch banks”, Millennials (aged 25-34) are two to three times more likely to close their accounts with their primary bank than other people. It was also found that millennials are twice as likely to close all their accounts and change banks. Due to the fact that this demographic is at the top of financial service usage, holding on average 6.27 financial products, switching banks can drive a large amount of consumer churn.
Statistics show that 45% of millennials aged 25-34 and 36% of younger millennials aged 18-24, claimed high fees as the primary reason for switching banks. The second largest reason was encountering a negative experience when they missed a payment. This was followed by inconvenient locations of branches and not enough number of operating ATMs. In addition to these reasons, younger millennials also claimed to have had a negative fraud-related experience. The survey showed 16% of millennials (25-34 year-olds) looking to opt for an ‘everyday banking product’ with an online-only bank, in the near future.
The survey from Accenture revealed that 16% of millennials closed their accounts in large banks. There was a 5% increase in millennial customers in local banks and 3% increase in credit unions, in the year 2015. The reasons for switching banks, relayed by millennials, are poor loyalty programs, high fee, and lack of personal attention.
According to the Financial Brand survey, on average, 12% of all financial services customers are ‘very likely’ to switch their main banks in the next 12 months. The following is the breakdown of customers who are more likely to change their banks in the next 12 months, in terms of age groups:
CONCLUSION
To sum it up, the top three reasons for switching banks are good competitive pricing (39%), high-quality customer service (34%), and good value for money (32%). 13% of young millennials (18 to 24 year-olds) and 16% of 25 to 34 year-olds said they are more likely to switch banks in the next 12 months.
Thank you for using Wonder! If you have any more questions, please let us know.