RBC leads Big Five banks in customer satisfaction for third straight year

Customer satisfaction with Canadian banks has risen slightly this year, driven by improvements at the country's largest lenders, according to a new survey. The J.D. Power survey found overall satisfaction increased by three points on a 1,000-point scale. Royal Bank of Canada ranked highest among the Big Five banks for a third consecutive year with a score of 619. Bank of Montreal and Canadian Imperial Bank of Commerce tied for second place with 611 points, while Toronto Dominion Bank placed fourth with a score of 610. Among midsize banks, Tangerine Bank was ranked the highest for a 15th consecutive year with a score of 676.

The survey points to a growing threat of competition, with newer fintechs outperforming Big Five lenders and midsize banks across certain key factors. Paul McAdam, senior director of banking and payments intelligence at J.D. Power, said the results show traditional banks face a challenge retaining younger clients. "Younger customers can be satisfied with their bank and still leave if they see a better opportunity to save money elsewhere," McAdam said in a news release. The survey found 17 per cent of gen Z and gen Y customers of traditional banks say they are likely or will definitely switch their primary lender in the next 12 months, the highest level recorded in the past five years.

Fees and rates drive potential defection

For younger customers, fees and competitive rates were identified as a particular vulnerability for the larger banks. McAdam noted that monthly banking fees become a prominent expense when household budgets are tight. "When household budgets are tight, a monthly banking fee becomes an expense worth reconsidering," he said. "Traditional banks cannot take the next generation's loyalty for granted." The survey results were compiled from responses from 14,038 retail banking customers of large and midsized lenders. Responses were collected between January and February and again from July to August.

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Customer confusion over AI use

The survey revealed widespread confusion among customers about how their banks use artificial intelligence. Only 12 per cent of traditional retail bank customers indicated they understand how their lender uses AI. Meanwhile, fraud prevention and data security led the list in how customers prefer their bank to use AI. The use of AI among lenders was seen to be unclear to most customers.

The findings suggest that while the largest banks have made incremental gains in customer satisfaction, they must address specific concerns to maintain their customer base. The high intent to switch among younger demographics, coupled with the strong performance of fintech competitors, indicates the competitive landscape is shifting. The next phase of competition may involve not only fees and rates but also clarity and trust in how banks deploy new technologies like AI. The survey showed that overall customer satisfaction rose by three points on a 1,000-point scale, mainly driven by improvements in the Big Five banks.

With files from The Canadian Press, The Globe and Mail and BNN Bloomberg