Nationwide has been named the UK's best-performing brand for customer service, as banks and building societies overtook retailers for the first time, reflecting a dramatic turnaround for a sector still rebuilding trust after the 2008 financial crisis.
The latest UK Customer Satisfaction Index (UKCSI), published by the Institute of Customer Service, gave Nationwide a score of 87.3 out of 100, ahead of John Lewis on 87.1 and digital bank First Direct on 86.0. Jet2holidays, Specsavers and PayPal also scored well.
The survey found customer satisfaction has now improved for a fourth consecutive reporting period, rising by one point over the past year to 78.3.
However, the pace of improvement has slowed sharply, with the index increasing by just 0.1 points over the past six months as consumers become more cautious about the economy.
For the first time since the index was launched in 2008, banks and building societies ranked ahead of the retail sector, which has traditionally been the UK's strongest performer for customer service.
The Institute of Customer Service said the banking sector's recovery had been driven by years of investment in technology and staff training, stronger competition and the introduction of the Financial Conduct Authority's Consumer Duty rules in 2023, which require firms to prioritise good customer outcomes.
Jo Causon, chief executive of the Institute of Customer Service, said the results marked “a long-term turnaround for an industry whose reputation was severely damaged with the financial crisis”.
“The sector has led the way in app development, with many providers now offering an excellent digital experience for routine transactional elements combined with well-trained, motivated and empowered employees for more complex requirements,” she said.
“Regaining trust has been paramount.”
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She added that consumer duty had also helped ensure customer experience had become “a boardroom priority” across financial services.
Retail's loss of the top spot reflects the increasing difficulty traditional retailers face in differentiating themselves as online shopping becomes more standardised and customer experiences are increasingly shaped by third-party delivery firms.
The biggest improvements over the past year came from OVO Energy, whose customer satisfaction score rose by 7.9 points, followed by Northumbrian Water, up 7.3 points, and Land Rover, which gained 7.1 points.
The report also found a strong relationship between customer service and financial performance.
More than a third of consumers (34.4 per cent) said they were willing to pay more for better customer service, compared with just 11.6 per cent who prioritised price above everything else.
Customers who rated a company nine or 10 out of 10 for customer service were almost twice as likely to recommend it as those giving a score of eight, while they were also significantly more likely to remain loyal.
The trend appears to be reflected in the banking sector. Between October and December last year, banks and building societies that scored above the sector average in the customer satisfaction rankings recorded net gains in current accounts, while weaker-performing firms lost customers. Nationwide was the biggest beneficiary, recording a net gain of 64,527 current accounts.
Among supermarkets, retailers with customer satisfaction scores above the sector average achieved average sales growth of 4.3 per cent in the 12 weeks to 17 May, compared with overall market growth of 2.3 per cent.
Despite the improvements in customer service, the survey suggests consumer confidence is weakening.
The proportion of people who said they felt better off than a year earlier fell from 38 per cent in January to 35 per cent, while optimism about personal finances and the wider economy also declined. More than a third of respondents now believe it is a bad time to make major purchases, up from 31 per cent six months ago.
Ms Causon said the findings showed businesses faced a more challenging environment despite higher customer satisfaction.
“Our data shows consumers are less confident in their outlook for both the UK economy and their own personal finances than they were six months ago,” she said.
