Americans Hesitant to Break Up With Big US Banks

Americans are slow to change U.S. banks, even though they could be missing out.

Credit unions (CUs), with a 6% higher-than-average member satisfaction rate, could cash in.

As The Wall Street Journal noted Dec. 8, U.S. banking customers have lost out on a theoretical combined $42 billion in savings during the third quarter of 2022. Those who moved their funds to high-yield savings accounts when the Federal Reserve began raising rates may have been rewarded for the effort. For example, LendingClub offers a 3.6% annual percentage yield (APY) for their high-yield savings accounts. This is clearly much higher than the Big Five’s rates, which averaged 0.4% interest in savings and money market accounts during Q3.

Reasons for this reluctance to change vary. They include the time required to switch financial institutions (FIs) and a lack of critical thinking about personal finance and convenience. However, consumers are willing to switch FIs, especially if offered innovations fitting their needs. These drivers present a chance for CUs to leverage these needs and expand their customer base. Best of all, this could be accomplished without the need to raise savings account interest rates. The secret may lie in both the introduction of innovative offerings as well as CUs’ greatest strength: customer satisfaction.

And, in today’s digital landscape, customer satisfaction for FIs indeed requires innovations — technological or otherwise.

PYMNTS research consistently reinforces what consumers desire from their FIs — especially any innovation that could simplify their online experience. One-third of consumers interested in an all-in-one app are intrigued about the possible convenience it could bring to their financial transactions.

That convenience, according to Jeff Hibbard, chief digital officer at Truliant Federal Credit Union, also extends to younger customers’ interest in on-demand banking. In an interview with PYMNTS, he described Truliant’s push toward meeting those demands.

“How we respond as an organization is to … think about how we really get a laser focus [on member experience] and understand what our members want and how they want it, and then do a really great job at adapting our offering to meet that need.”

CUs are challenged to maintain their 6% higher-than-average member satisfaction rates in today’s landscape. Upgrading their intelligent data strategies to provide their customers with optimal service is quickly becoming a must-have rather than a “nice to have.”

In a PYMNTS interview, Jeremiah Lotz, managing vice president of digital and data at PSCU, explained that intelligent data use is key for CUs to retain customer loyalty.

“Intelligent data is the right information, for the right scenario, that creates the best experience for the consumer,” he said.

There are other avenues CUs may examine to retain customer loyalty without raising savings account interest rates. One might be the introduction of digital wallets, which have retained their pandemic-boosted popularity for both ease of use and security. And, as more merchants accept digital wallets, their adoption rate is on track to soar.

Another strategy may be good old-fashioned customer outreach. A CU could have the most cutting-edge payment platforms and top-notch security, but none of those matter if their customers don’t know these services are offered.

“[Customers] are going to find value in what they use,” Lotz said. “Any hesitation or trepidation on the part of the consumer is a friction point.”

Americans may be hesitant to switch FIs. However, CUs could possibly leverage their strength in customer satisfaction to overcome any consumer trepidation and perhaps even thrive in these uncertain times.