Forrester Study: Credit Unions Near Top of Customer Advocacy List, Blow Away Banks

CAMBRIDGE, Mass. – Credit unions outrank banks by a long shot for customer advocacy, according to a recent survey by Forrester Research, Inc.

Of 32 leading financial services firms, credit unions came in second-with 67% of members agreeing that they act in “the customer's best interest”-to USAA, an insurance company. GEICO insurance came in third with AAA and State Farm rounding out the top five.

CUNA Chief Economist Bill Hampel pointed out that credit unions were actually in a statistical dead heat with USAA's 68% affirmative rating and a 6% margin of error. “It's really strong results,” he commented.

Forrester previously determined that customer advocacy is the leading component in customer loyalty. Firms that score high on customer advocacy also do well in simplicity, transparency, benevolence, and trustworthiness, an endnote to the report said. “Top firms demonstrate transparency by providing customers with fair rate and performance comparisons, and being clear about the rates and fees they charge,” it read.

Credit unions have ranked second over the past three years that the group has been conducting the survey. The report states, “In fact, many of the organizations at the top of our rankings have consistently landed near the top of the list, including AAA, State Farm, Vanguard, and Edward Jones. All of these organizations are customer-owned except for Edward Jones, which is employee-owned. Without the currency of stock shares to spend on acquisitions each one of these firms is able to grow its revenues organically-a testament to the favorable economics of customer advocacy.”

Though not included in the report, `regional or local banks' were included in the survey, according to study author Bill Doyle. He said they were not included in the final report because there was no data on them from the previous year, but they did not score nearly as well as credit unions. According to Doyle, `a regional or local bank' only received 49% backing from customers as strong on customer advocacy. The choice will be included in next year's report, he added. Property and casualty insurers ranked near the top because they offer simple products that are easy for consumers to compare, Forrester said. They also have relatively little interaction with their customers until they have the opportunity to fix a major problem for them.

“Like the past year, Citibank and JPMorgan Chase are the two lowest-ranked firms in our ranking,” the report read. “In fact, six of this year's bottom seven firms are large banks like Washington Mutual, Wells Fargo, and Bank of America.” Wachovia Bank was the highest-ranking bank with just 36% of customers saying their financial provider does what is best for them, “not just its own bottom line.”

The report continued, “Some will argue this hasn't hurt them: Big bank revenues have grown during recent years. But the growth has often been fueled by acquisitions. We believe that firms with high organic growth-like those at the top of the customer advocacy rankings-are best positioned to grow in the coming years, as intense competition forces firms to focus on selling more to the customers they already have.”

America's Community Bankers Senior Vice President of Corporate Communications Bob Schmermund commented, “From what I've been able to glean, it's been a little misleading. They have all these large, well-known entities that are all over the place.” He noted that those included in the survey are banks and brokerages and insurance companies.

The Independent Community Bankers of America declined to comment and the American Bankers Association had not responded to a request for comment as of press time.

Forrester Research, an independent technology and market research company, has been in business 22 years.

-scooke@cutimes.com