After consistently beating out large banks in customer online banking satisfaction, credit unions are lagging behind them for the first time.
That’s according to an annual research report released by Ann Arbor, Mich.-based firm ForeSee Results. The study gave credit unions a score of 86 out of 100 in customer online banking satisfaction, one point less than the score earned by large banks. Large banks saw a five-point gain in the study from 2010, putting them ahead of credit unions for the first time. CUs saw a two-point gain from last year.
The online banking study gives aggregate scores to five categories of financial institutions based on size and type: top 5 banks, top 6-10 banks, large banks, community banks and credit unions. The results are based on a survey with nearly 3,000 respondents conducted in April 2011. ForeSee Results uses the online methodology of the American Customer Satisfaction Index founded at the University of Michigan to analyze survey data, the firm said.
"While nearly every category improved since last year, large banks gained the most, surging five points to barely overtake credit unions, which climbed two points," the report states. "This disparity in year-over-year satisfaction gains (large banks plus five; credit unions plus two) is perhaps more significant than the one-point score difference."
ForeSee Results President/CEO Larry Freed, who authored the report, said while credit unions earned high scores in the study, it’s getting tougher for them to compete with large banks in the online banking arena.
"Overall when you look at the score, it’s still a strong score," Freed said. "But at the end of the day, credit unions are facing some challenges. Because of the consolidations that have taken place, large banks have become more focused on the customer than they were before. And as they deploy new channels, such as mobile channels, the bar is being raised for credit unions to keep up."
Freed said the survey also revealed two areas that offer credit unions the most room for improvement: transactions and website value. In a chart that lists recommended priority levels of various online banking elements, the report gives credit unions a priority level of two (which calls for "maintenance or improvement") for their websites and facilitation of self-directed online member transactions.
The study also found financial institution customers are far more satisfied with online banking than they are with offline banking and customers who are satisfied with their financial institution’s online banking services are 63% more likely to trust their institution and 56% more likely to be satisfied with their institution overall.
"Credit unions are in a tough spot," Freed added. "They want their relationship with the community to be positive, but they also want the vast sophistication and capabilities that large banks offer."
How are credit unions, many of which are investing in new online banking features, reacting to this news?
Lee T. MacMinn, president/CEO of the $500 million, Warminster, Pa.-based Freedom Credit Union, which recently rolled out iPhone remote deposit services, is not worried, given that credit unions still beat out community banks and the top 10 biggest banks in the study.
"The fact that large banks have finally caught up with credit unions in online banking satisfaction does not concern me," MacMinn said. "While we cannot ignore keeping online banking channels fresh and up to date, most credit unions are focusing their resources on mobile banking. Online banking, much like branches, will always be an important delivery channel, but mobile banking is the new frontier."
Brad Beal, president/CEO of the $695 million, Las Vegas-based Nevada Federal Credit Union, which announced a "new online experience, iPhone and Android apps coming in June" on its website, said he views the survey’s scoring of credit unions and large banks as a "statistical dead heat."
"It’s not surprising the big banks scored well, given the massive resources they have to devote to technology and marketing," Beal said. "It’s also no secret that availability of all types of mobile applications is expanding exponentially, including those pertaining to personal finance."
CUNA also had a look at the results and stated that diminishing budgets are likely related to credit unions’ new ranking behind large banks.
"The INGs and Capital One banks in the marketplace have plenty of money to sell their brands and their services through incessant national advertising," CUNA spokesman Pat Keefe said. "Credit unions clearly do not have the same deep pockets, especially after the last couple years with corporate assessments [and] insurance premiums. But, in spite of that, credit unions remain a close second to large banks in online services satisfaction, showing that credit unions clearly do more with less and certainly are not out of the game."
It’s not just the credit unions themselves holding the reins in online banking innovation–their online banking, marketing and facilities vendors play a role as well. Steve Williams, a principal at Scottsdale, Ariz.-based financial industry consulting firm Cornerstone Advisors, which has worked with hundreds of banks and credit unions, said a combination of shrinking budgets at credit unions and their vendors may be the cause of the study’s results.
"Part of the root is the financial crisis of the past three years," Williams said. "Credit unions have had to defer some of their Web channel investments, and they’re just now waking up to this."