Customer satisfaction with banks may have held steady from last year to this year, but customer loyalty is declining rapidly, according to J.D. Power & Associates’ fifth annual Retail Banking Satisfaction Study.

Out of a possible 1,000 points, overall bank customer satisfaction is 748 this year, down just one point since last year. But Rocky Clancy, executive director of financial services at J.D. Power in Chicago, said the real story is in the numbers of customers who said they definitely would not switch banks in the next 12 months. That number stood at 46% in 2007, but has fallen steadily over the past two years to just 34%.

Big banks are dragging that number down—only 32% of their customers say they’re sticking with their institution, compared to 41% of customers at community banks. “The perception last year was that the bigger banks were more stable than smaller ones, so big banks got a lift just from that,” Clancy said. “That’s evaporated this year.”

Poor customer service is the most common reason people switch banks—37% of people who changed banks in the past year did so because of issues they had with service levels.

Customers are more likely to be personally greeted at a small bank, often by name, and then thanked for their business, Clancy said. While he points out that this level of service is only happening half of the time, “the small banks are better at it.”

The fundamental challenge for large banks intent on keeping their customers is in implementing programs that eliminate service variance across often-huge footprints, Clancy said.

The second-most common reason people switch banks is fees. Some 29% of bank customers who moved their accounts did so because of them. Oftentimes, customers’ ire was raised because banks charged fees without explaining them and having customers agree to the arrangement first.

“People have to know what the deal is upfront,” Clancy said. “Transparency is critical, and if there are choices for the customer to make, banks have to be extremely explicit about what those choices mean. If you’re not transparent about fees, clients are totally against them.” The same holds true for fees financial advisors charge their clients, he warned.