Although the battle cry has waned slightly and the confetti now only dusts the streets, credit unions wonder... did Bank Transfer Day have a strong impact on reshaping consumer behavior?
Javelin Strategy & Research reports that although over 600,000 consumers have switched from big banks to credit unions, the momentum may be coming to a screeching halt.
Javelin founder, Jim Van Dyke said, "It was a meaningful movement of people from big banks into small community banks and credit unions, but it wasn't a huge number by any stretch.”
He adds, "It was quite a feat. I don't think we'll see it repeated any time soon." Why? Van Dyke refers back to the old notion that it takes more than a simple incident to push people to leave their bank and that having to “undo” services like direct deposit and bill pay leave many consumers with that feeling of “why bother.”
"Individuals are really resistant to moving their money out of banks," he said. "The difference between what they say and what they do is really different." Javelin tracked and researched consumer banking behavior during a survey in 2003.
He backs this statement by noting that an additional 200,000 consumers stated that they moved their money from one of the top big banks to a credit union due to Bank Transfer Day but ended up taking no action.
Misconceptions and Banker’s Opinion
Although moving money can be challenging, misconceptions within the bank-heavy industry continue to rage. Despite the wide availability of member assistance and revolutionary, cutting edge technology offered at most credit unions, Van Dyke claims that young adults are still hesitant leave their big bank because they are under the impression that community banks and credit unions do not offer the same line of “robust online banking tools.”
"It turned out that technology and individuals' inertia really won the day in favor of the large banks," Van Dyke says. "If this continues, these small institutions will go the way of the Oldsmobile."
Multi national giants are also not feeling much pressure. American Bankers Association spokeswoman Carol Kaplan says that movement from Bank Transfer Day was miniscule, but made banks sit up and take note.
She says, "While these 600,000 adults represent an exceedingly tiny fragment of the hundreds of millions of Americans with bank accounts, the industry takes consumer sentiment seriously... Consumers have a wealth of choice and banks have always been in favor of competition, regardless of where it comes from.”
Although much of the fervor stemmed from Bank of America’s $5 debit card fee, Van Dyke says that the giant didn’t take a huge hit and losses were similar to what other big banks experienced during Bank Transfer Day. "We didn't see any individual bank punished out of this more than the rest," he says.
During a recent conference, Bank of America CEO Brian T. Moynihan said that the bank experienced a 20% decrease in account closings from fourth quarter 2011 versus the same period in 2010. "So I'd say that yes, we had some impact from the $5 debit fee. That's why we made a decision to reverse it."
Ed Mierzwinski, consumer program director for U.S. PIRG believes that Bank Transfer Day did have an impact. Referring to Moynihan’s assertion he said, "Bank of America got the message and did take a hit. Bank of America and other big banks now know that unfair practices will and do result in consumers voting with their feet.”
Credit Unions Believe Bank Transfer Day Was Significant
Either way Javelin reports that 5.6 million consumers switched to a credit union in 2011 with only 11% of the switch represented from Bank Transfer Day.
Carolyn Jordan, SVP at Neighborhood Credit Union ($275 million, Dallas/Ft. Worth, TX)refutes Van Dyke’s comments about the movement slowing down.
“We have seen continued movement from the megabanks in the Dallas area since Bank Transfer Day. While the debit card fee is no longer an issue, many of the new members who have come to us expressed that after hearing of potential new bank fees, this got them thinking about and looking at credit unions.”
As a result Jordan says that Neighborhood is seeing tremendous results in new member activity. “In December we opened 481 new checking accounts which is a 66% increase compared to December of 2010. We had an all time high in January 2012 opening 471 new checking accounts, which is a 58% increase over January 2011.”
Jordan also uses a new member comment to demonstrate how bank customers may be under the misimpression that convenience and superior technology aren’t available at credit unions.
“One new member I recently talked to said that she was amazed at the fact that we are just as convenient as a bank. She thought that she would have to trade the convenience of ATMs and robust online banking for personal service but has discovered that this is not the case. She told me that she has the benefit of convenience and personal service with us and she just loves it. She expressed that she would never go back to a bank after experiencing the difference of Neighborhood Credit Union. This made me very proud.”
Although Bank Transfer Day founder Kristen Christian was not officially part of the Occupy movement, she struck a chord in the hearts and minds of many who are. Occupy San Francisco activist Brian McKeown felt that although protesting sent a message, taking action would have a more significant impact. Late last year he planted the seed of what will be a new credit union in the Bay Area called People’s Reserve Credit Union.
Although the credit union is still in its infancy stages, McKeown and his advisor San Francisco entrepreneur Tim Mayer said that while People’s Reserve will look and act like a credit union, members may see differences.
Borrowers seeking loans will have to agree to attend special financial literacy courses concentrating on business and personal finance. Special mentors will also be assigned to commercial borrowers to help their business succeed, which will ultimately motivate the borrower to pay back the loan.
In fact McKeown plans to also be diverse with his loan parameters as he may be offering business loans as low as $1,000. He said that the amount could possibly fund materials to make jewelry or allow a business to purchase a used server to create computer apps.
"I'd rather support 12 taco stands than one Taco Bell," he said.
Mayer says, "But there will be a different consciousness," and that the PRCU board "will not focus on shareholder profits," but will be "concerned with the welfare of those they are servicing."