Are the big banks losing ground with young clients?

J.D. Power's annual Retail Banking Study shows clients under 40 are less satisfied across touch points.

Overall satisfaction with Canada’s banks is up, but younger customers are more likely to be less satisfied with the level of service they receive and, ultimately, take their business elsewhere.

That’s according to the most recent edition of the Canada Retail Banking Satisfaction Study from consumer insights firm J.D. Power.

Based on a survey of 15,000 Canadians, overall satisfaction with Canada’s retail banks was 785 on a 1,000-point scale, up slightly from 782 last year. However, satisfaction among customers under the age 40 declined slightly to 777 from 780, while satisfaction among customers over 40 increased to 792 from 785. That is a 15-point difference in satisfaction between the two age groups, up from a five-point difference last year.

The decline in satisfaction among younger customers spans every factor respondents were asked about, from in-person bank branch service (down 14 points), problem resolution (down 13 points), automated phone service (down 13 points), live phone service (down 10 points) and assisted online service (down 10 points). Satisfaction also declined in automatic banking machines, online and mobile banking service, though by a smaller amount.

The study also showed that number of “digital-centric” customers – defined as those who use online and mobile banking services but have visited a branch no more than once in the past three months – has increased by 6%. While customers are using more digital banking services, these customers also experienced service quality declines during problem resolution, branch and telephone interactions. This is a problem for banks looking to retain younger clients, as younger customers are three times more likely to switch banks than older customers. During the past year, 9% of bank customers under the age of 40 say they have switched banks, compared with 3% of those age 40 and older.

“Younger and digital-centric customers are vital to future business growth, but younger customers are more likely to receive inconsistent service levels,” said Paul McAdam, senior director of banking intelligence at J.D. Power. “Banks have invested heavily in convenience, in digitizing transactions and in making products easier to use. Service quality, however, is not keeping pace in omni-channel interactions. Banks that don’t address the gaps in service expectations are at an increased risk of client departures.”

As has been typical with previous Retail Banking surveys from J.D. Power, satisfaction was higher among clients of mid-sized banks and financial institutions: the average satisfaction ranking for the big five banks was 781, compared to 798 for the mid-sized banks.

J.D. Power also released satisfaction rankings for each of Canada’s banks. Among the big five banks, TD ranked highest with a score of 789, followed by RBC with 784 and BMO at 782. Among the midsize banks, Scotiabank-owned Tangerine ranked highest with a score of 827 (the eighth consecutive year it has topped the rankings), followed by Alberta’s ATB Financial with 815 and Desjardins with 803.