first direct has topped a study looking at customer satisfaction with UK retail banks.

Despite an environment of cynicism toward banks, overall satisfaction has increased from 2010, according to the J.D. Power and Associates 2011 UK Retail Banking Satisfaction Study. This is based on: account activities; fees; product offerings; account information; and branch facility. Overall satisfaction among retail banking customers averages 698 on a 1,000-point scale, up from 683 in 2010. A considerable increase in satisfaction with the branch facility factor has helped drive this improvement. However, improvement is needed in three key areas: fees, product offerings and problem resolution.

"It appears that banks have taken action to improve the customer experience, and this effort has paid off," says Stuart Crawford-Browne, director of the services and emerging industries division at J.D. Power and Associates. "However, retail banks in the UK are still not consistently delivering on customer pain points, such as fees, problems and complaints."

While overall problem incidence declines slightly from 2010, with 19 per cent of retail banking customers experiencing a problem in the past year (compared with 21 per cent in 2010), the negative impact of problems remains large. In fact, 25 per cent who have experienced a problem during the past 12 months say they "definitely will" or "probably will" switch institutions in the next year, while just eight per cent who have experienced a problem say the same. Fifty five per cent who have had a problem or complaint say they are disappointed with the resolution process.

The study finds that problems with poor customer service, fees and service charges have a substantial negative impact on overall satisfaction. In addition, customers who experience a problem are considerably more likely to indicate that their fee structure has changed in the past year (30 per cent, compared with 14 per cent who did not have a problem). It also shows that while incentives are important in attracting new customers, customer service is key to retention. Fifteen per cent of customers say that they selected a particular bank because of an incentive, such as a promotional gift or cash award. However, nearly 40 per cent left their bank because of a poor service experience, and an additional 43 per cent cite poor service as a top reason for intending to leave their bank.

first direct ranks highest in customer satisfaction with a score of 774, followed by The Co-operative Bank (734) and Nationwide (723). It performed particularly well in four of the six factors: account activities; account information; product offerings; and fees.

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