Banks are failing to differentiate on customer service, a survey has indicated.

The most recent Roy Morgan bank customer satisfaction survey has shown the gap between the major banks continues to narrow, with less than 2.5% separating the front-runner, ANZ, from the bottom-ranking bank, CBA.

ANZ has ceded much of its lead in customer satisfaction, now only eclipsing Westpac by 10bps. ANZ posted only a 0.1% rise in satisfaction during July, increasing to 76.6%, while Westpac surged 50bps to 76.5%.

NAB has also given up some of the ground it gained on Commonwealth Bank after moving ahead of CBA in March. NAB's satisfaction ranking fell 30bps in July to 74.7%, while CBA's rose 50bps to 74.2%.

The narrow gap between the major banks means the big four are doing a poor job of differentiating their service propositions from one another, Roy Morgan industry communications director Norman Morris said.

"The big four banks are finding it very difficult to differentiate on customer satisfaction with only 2.4% points difference between them, which is the narrowest gap in over 10 years," he commented.

Morris said despite posting a 1.3% overall improvement over the past year, major banks continue to lag behind regionals, with CBA falling well short of its own subsidiary, Bankwest.

"Despite the improvements in satisfaction from the big four in total over the last 12 months, they are not gaining on their smaller bank competitors who have improved by 2.7% points overall to 83.5% satisfaction compared to 75.2% for the big four," Morris remarked.

ME Bank led second tier satisfaction at 90.6%, followed by ING Direct at 88.1%, Bendigo Bank at 87.9% and Bankwest at 85%.