Fewer customers had $10,000 or more in deposits at their primary bank in the past year, while the percentage of customers categorized as financially unhealthy increased, according to a new study from J.D. Power.

Customers have reallocated their funds to get higher interest rates or better savings programs, according to the J.D. Power 2023 U.S. Retail Banking Satisfaction Study. These shifts point to the need for banks to provide customers with personalized advice and guidance, J.D. Power said in a statement last week.

“It’s an incredibly tenuous time for both bank customers and financial institutions, and the need for trust between these two parties has never been more pronounced,” Jennifer White, senior director of banking and payments intelligence at J.D. Power, said in the statement. “Although our study was conducted prior to the recent high-profile bank crisis, the difficult economic conditions that contributed to the Silicon Valley Bank and Signature Bank failures have been building for quite some time. For banks to attain high marks in satisfaction and build the enduring loyalty that comes with it, customers need to feel supported through tough economic times. They need to be able to conduct their business with ease and feel like their funds are safe and secure.”

While customer financial health declined 9 percentage points year-over-year, most bank customers did not receive advice or guidance from their bank. J.D. Power measures financial health by combining customers’ spending and savings ratio, creditworthiness and safety net items.

Only 21 percent of customers said they received advice or guidance from their bank in the past year, but those who did receive guidance were significantly more likely to open a new account at their primary bank. J.D. Power said the rate of new account openings increased further when the advice completely met customer needs, with 47 percent of those who received effective advice opening a new account.

The study also found changes in deposit balances. The proportion of retail bank customers with more than $10,000 in deposit balances at their primary bank declined year-over-year from 44 percent to 28 percent. The proportion with less than $1,000 in deposit balances increased from 17 percent in the 2022 study to 30 percent in the 2023 study. Some customers chose to reallocate their funds, as 30 percent of primary bank customers shifted, on average, 37 percent of their deposits to a secondary financial provider.

J.D. Power also found that overall branch usage has grown to just below pre-pandemic levels. The study found that 72 percent of customers planned to use their bank’s branches at the same rate in the coming year, and 38 percent said branches were essential.

The study was based on responses from 101,400 retail banking customers of national and regional banks in the U.S. Fielded from January 2022 through January 2023, the study was divided into 15 geographic regions

Bangor Savings Bank had the top rating for the New England states, not including Connecticut, with a score of 723 on a 1,000-point scale. Eastern Bank ranked second with a score of 673, followed by Rockland Trust 655. The New England average was 630.

Middletown, Connecticut-based Liberty Bank had the top score for the Tri-State area, which included Connecticut, New York and New Jersey. Liberty Bank plans to open its first Massachusetts branch in East Longmeadow in the fall, according to regulatory filings.

Survey Suggests Depositors Searching for Yield as Financial Health Dips

by Banker & Tradesman time to read: 2 min