Academic journal article ABA Banking Journal

A Foundation to Build On

Academic journal article ABA Banking Journal

A Foundation to Build On

Article excerpt

Banks in 2001 find themselves regarded as trusted, safe, and capable financial institutions that a great many people do business with. But fewer of the people who believe those things about banks keep most of their money at a bank, or look to banks for their most important financial needs.

Those findings could suggest one of two things: that banks either have a great opportunity to build on a strong foundation, or that they face a continuing downward spiral in market share. The choice is not that stark in reality, however, because of the fact that a "bank," even in its most traditional sense, these days may own, or be part of a company that owns, a securities brokerage or an insurance agency or another financial services business. The passage of financial modernization legislation in 1999 opened up the playing field to a degree unseen before. That freedom, combined with the strong foundation cited above, would seem to represent a huge opportunity. But like any opportunity, challenge is an integral part of the equation.

What would help is to have greater insight into what consumers consider important, financially speaking, and to understand how they perceive banks.

Thus it was that the American Bankers Association's Education Foundation once again funded a new round of national consumer research--the fourth round conducted since 1994. The foundation's board, working with the ABA Communications Council, determined that it was of vital importance to continue to have a benchmark by which banks can measure their progress in an increasingly competitive marketplace.

The bankers on the foundation's board felt this year's research should explore not only consumer perceptions of banks compared with other providers, but probe further into what financial needs consumers have and how they view specific products and services.

For the third consecutive time, the Washington-based research firm of Mathew Greenwald & Associates managed the project for the ABA, ensuring a continuity of approach.

Mathew Greenwald, president of the company, observes that there are many strong findings for banks in this year's research, but also some serious challenges, particularly from credit unions. On balance he sees many opportunities to leverage banks' strengths.

"The results clearly show that people need financial counseling," says Greenwald. Traditional banking plays very well with older customers. Greenwald believes these strengths could also be a plus with younger generations.

The full survey results appear on the ABA's website (www.aba.com) and on ABA Banking Journal's website (www.banking.com/aba) in downloadable pdf format.

A good overall impression

The way the public views banking as an industry compared with other financial services industries (Figure 1) hasn't changed at all in two years. And that's not a bad thing because more than three quarters of the people polled (all of whom have an account or some dealings with a bank) have a favorable impression of banking as an industry.

The computer industry (included as a control factor), edged out banking as the most favorably regarded industry. But banking surpassed the other financial services industries by significant margins.

Looking solely at the "very favorable" responses, banking came in third behind credit unions and the computer industry.

In a pattern that repeats itself for many of the survey questions, older, less-educated, and lower-income customers express higher favorability toward banking. Also, females are more likely than males to express very favorable opinions of banking.

Banks used most often, but money is elsewhere

The survey found that three quarters of consumers who have some relationship with a bank say the financial institution they use most often is a bank (Figure 2). The proportion using banks has remained steady since 1997, after dropping from 83% in 1984. …

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