There's a growing divide between the way bankers and consumers view the banking industry, according to the annual Bank Administration Institution Index of Bank Consumer Sentiment, released recently.

Not surprisingly, bank executives have a rosier view of both the economy and consumer's feelings toward banking institutions than consumers themselves reported. 

The research established a baseline for banker and consumer sentiment in August 2009 and retested it again in February, 2010. While bankers' opinions of consumer sentiment rose 11 points (from 126 to 137 over the six months) the consumer sentiment index, which is a measure of how the bank customers actually feel, moved in the opposite direction, dropping 19 points (from 100 to 81), and widening the previous gap that existed last August by more than 50%.

Thirty-six percent of bankers surveyed in February 2010, felt the economy was better compared with six months earlier, a rise of 8%, while 18% of consumers felt the same way, an uptick of only 1% from last August. Only 44% of consumers feel strongly that their financial situation will improve as opposed to 47% who felt this way six months before.

"One key takeaway is that consumer sentiment overall as it relates to the economy has improved but as it relates to industry as a whole primary financial services has declined," says Deborah Bianucci, CEO of BIA.

The study also found that 21% of consumers, up from 17% six months earlier, said that they "didn't feel as good about trusting their primary financial institution to look out for their financial interests."

Consumer loyalty varied depending on the type of bank they used. Loyalty rose the most, by 37 points, at online banks and brokerages such as Schwab and Fidelity. Consumer loyalty toward large banks had the biggest tumble (16 points), while regional banks fell nine points and community banks fell only four points. Consumer loyalty toward credit unions and brokerage firms rose six and five points, respectively.

"In looking at various aspects of loyalty measures, online banks and brokerage have had a sharp increase in loyalty measures, where large and regional banks have had a slight decline, and community banks have been flat, says Bianucci. "With regard to the banks in general, our theory is that there's been a lot of negative press about fee income and that has had a dragging-down effect."

Online banks and brokerages have the luxury of dealing with one delivery channel, points out Ajay Nagarkatte, managing director of research at BAI. As such, they have been able to focus their resources on perfecting that channel more easily than banks that have multiple delivery services. "In a multi-channel environment, it's more complex to determine how to deliver customer service," he says. "Everything is consolidated in an online bank/brokerage. If you were to speak to executives of online banks they would tell you that many outsiders see their advantage as one of price and certainly there's price competition in the forefront, but because it's a singular channel they have the gift of focus. They can consistently deliver to exceed the expectations of consumers. Consumers will tell you their experience online is very different than in a branch."

While online banks are still by far the minority-the top three large banks alone still have 30% of the customer market and top five or six banks have about half the market-but online banking and brokerage is growing faster, Nagakatte said.

"The online only channel is still smaller but will grow because it provides a lot of value, and the technology through that channel has improved tremendously," he said.

Its comparable to what's happened with development of iphone, jumping from a simple phone service to allowing all kinds of data to travel over the airwaves. "As the technology improves so does the service," he said