A call to arms to ditch the
bigger US retail banks in favour of community banks and credit
unions started as just another posting on Facebook. What followed
suggested a number of lenders had underestimated the strength of
feeling created by the decision to increase debit card fees.
Charles Davis reports.
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What began as a trickle has become
a torrent. US banks now hope the worst of the damage from the most
significant consumer rebellion since the Great Depression has wound
its course, while credit unions and community banks hope bank
switching has only just begun.
As the new federal interchange
regulations forced more banks to begin adding fees for debit card
usage and to end free current account offers, consumers’
frustration grew.
Credit unions and community banks
with assets of less than $10bn are, of course, unaffected by the
new law and sought to capitalise on the backlash by targeting new
customers.
The inertia toward moving out of
the banks came in part from the grassroots movement, Bank Transfer
Day, on 5 November.
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By GlobalDataThe group’s Facebook-driven
organisers encouraged large bank customers to move from their banks
and consider credit unions.
Consumers did not need to wait
until the designated day to make a move, but the attention garnered
by the movement impacted the numbers of people switching
institutions.
Supported by consumer groups like
MoveOn.org and the Progressive Change Campaign Committee (PCCC),
Bank Transfer Day was designed to urge customers of the nation’s
biggest banks to switch to a credit union or community bank.
The PCCC says it received pledges
from about 53,000 people to take their money out of major financial
institutions by 3 December as part of the ‘Move Your Money’
initiative, with just under 22,000 consumers planning to remove
their money from Bank of America alone. About 7,000 customers told
the PCCC they have already moved their money.
In addition, the tool it launched
on 1 December to help consumers find a new bank or credit union,
called ‘Banxodus’, has already conducted 140,000 searches.
According to the Credit Union
National Association, an estimated 650,000 consumers joined credit
unions from 29 September until the first week of November – those
numbers do not include Bank Transfer Day totals.
That number is 50,000 higher than
the number of new members who joined in all of 2010, the
association said. The association estimates credit unions added
$4.5bn in savings accounts from the new members and existing
members shifting their funds.
While the industry trade group has
yet to tally the number of new customers since 5 November, traffic
to its website that helps consumers find a credit union hit a
record high on Bank Transfer Day – temporarily freezing the search
tool on the site.
The Independent Community Bankers
of America saw page views increase 500% over the weekend of Bank
Transfer Day from the previous weekend.
During the month of November, page
views soared by 832% – with well over 5,000 page views – compared
to the previous 30 days.
The Credit Union National
Association said credit unions are advertising, sending ‘switch
kits’ to members to share with prospective members, beefing up
websites, extending hours and staffing for account transfers,
offering bonuses to members bringing in new members, and giving
bonuses to new members.
The defections may not be the worst
news for larger banks, as customers leaving may be the ones that
have fewer accounts with the bank, and therefore are less
profitable.
The deeper and more profitable the
banking relationship, the harder it becomes for account holders to
leave the bank.
A recent survey by Aspen Analytics
found that households who used a bank’s bill pay service were 76%
less likely to switch banks than those who did not use such a
service.
No grass-roots movement is likely
to make a dent in the nation’s largest retail banks. Bank of
America – the recipient of much of the movement’s ire following its
short-lived decision to levy a $5 monthly debit card fee – has 58m
retail and small business accounts.
Credit unions are trumpeting that
they are not-for-profit financial cooperatives – not allowed to
sell stock or take on debt.
A Bankrate.com survey found 64% of
Americans would consider switching banks if current account fees
increased. Among the more affluent, the figure was nearing 75%.
Credit unions and community banks are likely to continue to
hammer away at their larger brethren.
