The findings reveal that while the general level of customers’ satisfaction is favourable, the relationship between customers and the banking institutions needs to be improved. While one in three customers is satisfied with the banking relationship, it did not imply loyalty. The survey also identified factors that customers are looking for in their banking relationship. Among the primary needs are the quality of interface with bank staff; and the effectiveness and efficiency of delivery channels, in particular branch banking and ability to deliver effective service in transacting and the efficiency in application processing. Secondary requirements represent potential leverage factors which can be used to substantially improve overall customer relationship. These include product innovativeness with value-added features and electronic banking including internet banking. These secondary core needs would become primary drivers and important elements in banking relationship. Additionally, the survey indicated that younger and middle-income individuals, a growing customer segment, prefer to use ATMs and electronic channels. Another growing segment is the “Older Affluent”, in the middle and higher income levels. Given the growing size of this customer segment and their higher income level, they require a wider range of innovative investment products that offer safe and steady returns as well as personalised financial advisory services. The challenge therefore is for the industry to pro-actively respond to these customer priorities now rather than waiting for increased customer churning. Fundamental to achieving greater customer-centricity is to ensure that the staff, processes and orientations are aligned towards fulfilling customers’ expectations and delivering superior customer’s experience.

A better arbiter of market power may be measures of market contestability, in particular the potential for barriers to entry to and exit from the market. Entry and exit rates from banking have, historically, tended to be very modest by comparison with the non-financial sector and other parts of the financial sector, such as hedge funds. For banks operating in many markets and offering a range of services, aggregate returns may offer a misleading guide to the degree of market contestability. Looking separately at the different activities financial firms undertake provides a potentially clearer indication of the drivers of performance and the structural factors determining them. In this respect, JP Morgan Chase provides an interesting case study. JP Morgan Chase is a large universal bank offering a full package of banking services to customers, retail and wholesale. Its published accounts also provide a fairly detailed decomposition of the returns to these different activities. Chart 36 looks at the returns on equity at JP Morgan Chase, broken down by business line and over time. These estimates are based on the firm’s economic capital model. So provided this model adequately captures risk, these estimates ought to risk-adjust returns across the different business lines, allocating greater amounts of capital to riskier activities. (a)  “Low risk/low return” business activities  Consider first some of the activities generally perceived to be low-risk/low return – asset management and treasury and securities services and retail financial services.