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Disappearing Customer

They may not know it, but many US banks are experiencing a net decline in their overall organic growth rates of checking customers. Simply put, they are acquiring fewer new customers than they are losing through attrition. This should be a growing concern for banks given the rising-rate environment and heightened competition for profitable deposit growth.

Customers are also disappearing in the literal sense; the shift toward digital transactions means that banks have fewer opportunities to actually see their customers, making it more difficult to form relationships with them.

It is imperative that banks address these trends that are often taking place under the radar.


There are fewer new customers for banks to pursue. Novantas has determined that the overall percentage of customers switching primary institutions has dropped by a third from around 15% pre-crisis to around 10% today.

There are multiple reasons for the drop: a sharp decline in free checking, which has reduced acquisition rates, as well as improved customer service that has improved retention rates for some banks. Furthermore, census data shows that Americans are staying put and are less likely to feel a need to change banks. (The latest Census data shows the percentage of Americans moving over a one-year period fell to an all-time low of 11.2 percent in 2016.)

The result: the total amount of people in play has dropped from an estimated 20 to 25mm to around 15 to 17mm annually.


It would initially appear that the decline in “switchers” is a bright spot because churn rates also have declined. Digging into this further, however, reveals other seemingly-subtle forces that are key factors in the customer acquisition game.

First, one must understand why the 10% of switchers in the industry today are considering a new primary bank. More than 60% of the drivers of this activity are related to life events like a marriage, divorce or move to a new state. These are activities that are somewhat outside of a primary bank’s control because the customer often feels that a switch is necessary (Exhibit 1).


The remaining 40% is more directly in the bank’s control and is tied to the customer’s overall experience and value that they believe that they are receiving from the bank — either actual or perceived. Collectively, these represent the ‘voluntary switchers.’

Digging deeper into the life-event triggers, we find that these three categories are often intertwined.

A move that takes the customer out of the current branch footprint, whether related to a life event and/or a job change, is by far the largest factor. In this instance, the Southern parts of the country and several other “gateway” cities (e.g., New York, Boston, Washington DC, Chicago, Los Angeles and San Francisco) are accruing a large share of net new customer growth. The South, which is attracting people from the Northeast, Midwest, and the West, stands out not only in terms of the magnitude, but also the quality of the movers (measured in terms of average income, professions, and other common demographic measures).

Combining these trends with the large physical presence of the National Banks and their investments in major metro markets, it isn’t difficult to see how they have continued to methodically gain share of new primary customers. They are also cementing their position with existing customers.

If these trends continue, it is quite possible the National banks’ share capture of total consumer checking customers in play might exceed 50% per year compared with a current rate in the high 30% range.


There are three major actions that banks should emphasize in order to retain existing customers.

First, they must proactively tell the customer who is moving that he/she can successfully transact outside of the immediate branch footprint and receive assistance when necessary. Banks must address the stresses that accompany a move, issues that are inadequately address when compared with other countries or certain customer segments (such as the military or large corporations) where moving is the norm. Banks should pursue a straightforward approach that creates awareness and highlights the wide range of the current provider’s mobile and online functions, contact center, foreign ATM access.

Second, banks must strive to achieve parity on the most important aspects of the National banks’ perceptions of physical and digital conveniences.

As Novantas has previously addressed, one of the major obstacles that banks face in their consideration as an acceptable new primary bank is that prospective clients don’t know the range of competitive functional services that the new bank offers and how it compares with their current bank.

This is important because people who leave their bank often do so because they feel lost and under-appreciated. Banks must let customers know that they, too, can serve all their needs. Many of these functional necessities from the customers’ perspective are quite basic and not necessarily related to leading-edged technology. Instead, it is a more emotional issue that involves a customer’s view of their hard-earned checking and savings balances.

Lastly, banks must make it as easy as possible for existing customers to stay or to get new clients to switch. In either case, this is something that customers increasingly expect and value, often more so than other radical product designs or promotions. Simplicity — from providing clear, concise information, faster transactions – is winning.

It may seem like we have been discussing such tactics for many years. Yes, we have. But as customers increasingly move way from branches, banks need to double down on these approaches in order to keep their customers.

Indeed, banks can learn a lesson from someone like credit-union customer Philip Maggi. The 48-year-old government-affairs consultant opened an account with a DC-based federal credit union when he moved to the capital in 2001. The credit union has remained his primary provider despite moves to California and Connecticut in subsequent years. Why? He does all of his transactions online and gets cash from ATMs that are part of the credit union industry’s fee-free network.

“The fact that there isn’t a local branch in my town? I couldn’t care less,” he said.

Gordon Goetzmann
Managing Director, New York

Rick Spitler
Co-CEO, New York

For more information, contact Novantas Marketing

+1 (212) 953-4444

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