For a fourth consecutive year, customer loyalty and perceptions of brand image among retail banking customers continue to decline, while satisfaction has leveled off, says an annual J.D. Power & Associates retail banking satisfaction study released earlier this year.

Now in its fifth year, the study found that overall satisfaction of retail banking customers averaged 748 on a 1,000-point scale, down one point from last year's 749. The brand image of banks also has continued to decline, with customers perceiving banks as being more profit-driven than customer-driven, compared with 2009, J.D. Power says.

In addition, the percentage of customers who said they definitely wouldn't switch banks during the next 12 months has fallen significantly over the past three years, to 34 percent this year from 46 percent in the 2007 study.

The gap in loyalty intent between customers of larger and smaller banks is considerable, with 41 percent of surveyed customers at smaller banks saying they definitely wouldn't switch, compared with 32 percent at larger banks. Higher customer satisfaction with in-person service and attention is an important contributor to increased loyalty at smaller banks, J.D. Power says. Acquisition rates also are improving at smaller banks, with new customers accounting for 8 percent of the customer base, compared with an industry average of 6 percent.

Poor customer service—the most common reason given for switching banks—was cited by 37 percent of customers who said they changed their primary bank this year. Performing simple service acts, such as greeting customers as they enter the branch, offering additional assistance, and thanking them for their business, may increase overall satisfaction by nearly 50 index points, yet less than 60 percent of customers report experiencing such acts, J.D. Power says.

"As retail banking customers become considerably less loyal, banks need to focus on getting the fundamentals right," says Michael Beird, J.D. Power's director of banking. "Banks that get back to the basics—such as maintaining a clean branch and greeting customers upon entering—may help to alleviate some of the distress customers are experiencing and increase their overall satisfaction."

Fees continue to have a major impact on customer loyalty, as 29 percent of customers who switched banks so far this year cited high fees for products or services as their reason for switching.

"While fees have a significant impact on customer satisfaction, banks may mitigate this effect by giving customers choices," says Beird. "Customers tend to be considerably less dissatisfied when they have different overdraft options, such as the ability to transfer funds from a savings account or receive a balance alert."

The study also found that customers might be highly satisfied even when they are charged bank fees, provided that they perceive they are receiving sufficient value in exchange. When satisfaction with fees is above average, customer's ratings for branch access and appearance, promptness of being served, and the bank's Web site navigation and range of services also are higher than average, J.D Power says.

Use of remote banking options is becoming increasingly common, with 51 percent of customers in this year's survey indicating a preference for online banking, up from 45 percent in 2008. In addition, 7 percent of customers reported using a mobile device to execute such transactions as checking balances, transferring funds, and paying bills.

The study analyzed customer satisfaction with the retail banking experience based on six factors: account activities; account information; facility; fees; problem resolution; and product offerings. For the Northwest region, Spokane-based Sterling Savings Bank earned the highest ranking at 767, despite considerable publicity about its financial struggles. Wells Fargo and KeyBank ranked second and third, with 757 and 747 points, respectively.