Direct banks may be good, but they’re not unbeatable
Many direct banks are popular with consumers... at least initially. But new research shows that such joy can fade over time and missteps draw consumer anger quickly and publicly. Over time other banks and credit unions may find holes in their defenses to exploit. Here's what you need to know before starting your own direct bank, and some lessons for competing with these rivals more effectively.
Can traditional banks and credit unions compete with higher-paying online-only direct banks? New research from J.D. Power indicates that as strong as these newcomers have been so far, they are not invulnerable. And their weaknesses represent places where traditional player’s online efforts can be fortified. Some banking institutions have already begun pursuing blended strategies that may help them compete.
With today’s fickle consumer, time can be an enemy for any financial provider.
In J.D. Power’s “2019 Direct Banking Satisfaction Study,” direct banks score 866 satisfaction points out of 1,000, compared to 807 for traditional banks. However, from an expanded data set provided to The Financial Brand by Bob Neuhaus, VP of Global Financial Services, there’s an indication that initially high satisfaction with these high-tech competitors can erode over time. In fact, in several cases the rate of falloff in satisfaction between new direct banking consumers and those doing business for two years or more with their direct bank is striking.
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