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A new study from JD Power reveals a significant rise in “soft switching,” where consumers spread their financial activities across multiple providers. This trend has critical implications for banks and credit unions aiming to retain existing customer relationships, as well as those looking to expand their market share by attracting new accounts.
The Evolving Risk: Once a customer establishes a relationship with an alternative provider, their primary financial institution faces the risk of becoming secondary or, in some cases, losing the entire relationship. This isn’t usually an abrupt departure but a gradual erosion of a customer’s total share of wallet.
Key Insights from the Study:
- The average checking account holder now manages three distinct deposit accounts across different institutions.
- Approximately one in five consumers shifted funds away from their primary bank within the last three months, an increase from 17% in the previous survey.
- Attrition is rarely sudden; instead, it manifests as a slow, steady decline in engagement and funds.
- This subtle erosion of customer relationships is accelerating across various demographic groups.
“Whenever money changes hands, it prompts customers to re-evaluate their primary banking relationship,” explains Jennifer White, Senior Director of Financial Services Intelligence at JD Power. She notes that the 2026 U.S. Retail Banking Satisfaction Study reinforces a consistent pattern: declining customer satisfaction often leads individuals to quietly open accounts with other banks or fintechs, rather than immediately closing their existing ones. This results in relationships that simply fade over time.
White emphasizes that financial institutions have multiple avenues to safeguard their customer base while simultaneously positioning themselves as attractive options for consumers contemplating a change. The study also explores how banks are utilizing AI in customer-facing ways, revealing key insights into consumer priorities. With growing public awareness of AI’s role, their opinions are increasingly vocal, especially given that poor communication was identified as a leading cause of dissatisfaction.
Why Customers Seek Other Providers
Despite a slight increase in overall satisfaction among customers of major and regional banks (a two-point rise on a 1,000-point scale), the study highlights emerging weaknesses in specific satisfaction categories:
- Customer Communication: This area saw the most significant decline, dropping nine points.
- Customer Service Channels: Satisfaction decreased for channels like interactive voice, live phone support, online chat, and social media. However, email, web forms, and in-app messaging saw improved satisfaction.
- Product Fees: A persistent and growing source of dissatisfaction.
- Problem Resolution: This category experienced the most severe decline, a 13-point drop in the latter half of the study period.
While inertia still plays a role in preventing immediate switching, specific “trigger events” are frequently the catalysts that prompt consumers to diversify or move parts of their primary banking relationships.
Are Money Management Tools the Missing Link?
A crucial factor contributing to soft switching, according to White, is the absence of effective money management tools. Customers often desire a clear separation or “hard lines” for funds designated for emergencies, “rainy days,” or specific savings goals. The act of opening an account with another institution frequently occurs when a customer’s primary bank doesn’t provide the means to easily isolate such funds.
“Consumers are looking for features that allow them to segregate their savings from everyday spending, particularly when they lack the financial literacy to do so effectively with their current tools,” White states. She adds a sobering reality from JD Power research: “Two-thirds of the population experiences some form of financial unhealthiness, with over a third being vulnerable and struggling to meet monthly expenses.”
These individuals don’t necessarily need to establish entirely new banking relationships. Still, the allure of a compelling savings program or robust personal financial management tools offered by a fintech can be enough to draw them away for a specific need.
Strategic Counter-Move: Financial institutions can combat this by implementing features that allow customers to visually compartmentalize funds into “buckets,” “vaults,” or similar categories for financial planning. Ally Bank and SoFi, for instance, offer particularly strong examples of such capabilities. You can explore Ally’s “buckets and boosters” and SoFi’s “vaults” for inspiration.
A Dual Advantage: “These supportive tools appeal not only to financially struggling consumers but also to affluent customers saving for major purchases like vacations,” White observes. Another service gaining traction, especially among those with financial challenges, is earned wage access, a feature commonly offered by neobanks such as Chime and Dave.
For more insights, read: Consumers Say It’s Not You, It’s Chime
Exceptional Service Converts Bad Experiences into Loyalty
Delivering outstanding customer experience is a crucial defense against losing primacy. White highlights fraud incidents as particularly impactful case studies for building loyalty. During such emotionally charged times, customers fundamentally ask:
- Am I protected?
- Do I feel safe?
- Am I being heard?
“A negative experience, if handled expertly, can ultimately yield positive outcomes for customer loyalty,” says White. Effective fraud resolution should include:
- An immediate apology, such as, “I’m truly sorry you’re going through this.”
- Active listening to understand the full impact on the customer.
- A clear timeline for resolution.
To further enhance the experience, White suggests providing customers with a list of recurring payments or bills linked to the affected account, enabling them to address potential disruptions. Offering credit monitoring tools or directing them to credit bureau resources also adds significant value. Such proactive efforts differentiate an institution from simply leaving customers to navigate complex issues alone.
“Going the extra mile in these critical moments cultivates a loyal customer base that truly believes, ‘This bank genuinely cared for me in my time of need’,” White concludes.
Further reading: Four Ways Banks Can Turn Fraud Into a Loyalty Play
Embrace and Communicate Your AI Strategy
Only one in five survey respondents feel their financial institution adequately communicates its use of AI. “This indicates that the industry is missing an opportunity to shape the narrative around how AI is actively enhancing customers’ financial lives,” White states. “Institutions can better explain the positive impacts of their AI initiatives.”
Consumers most desire AI applications that improve fraud prevention, strengthen data security, and help them avoid service charges. These top priorities directly link back to earlier identified customer concerns. White also notes that personalization is an underlying theme in all reasons given by consumers for wanting AI – they want their provider to make their lives easier.
Next read: How BECU’s AI Financial Advisor is Moving Beyond Product Answers to Customer Handholding
Source: thefinancialbrand.com