An article in today’s New York Times entitled “The Exaggerated Impact of Bank Transfer Day” states that 214,000 customer opened accounts with credit unions as a result of the much ballyhooed Bank Transfer Day event. With as much media blitz around the event as there was as well as the rash of articles around Bank of America’s debit card fee situation, you’d think millions would have moved their accounts. We’ll that did not happen and here is why:
- Consumers choose banks based on location as well as fees. Fees are just one factor in a consumer’s decision to “bank” with a given provider. As much or more a factor is bank access – more specifically convenience of branches and ATMs. In general, credit unions have fewer branches and ATMs than banks and do a poor job marketing benefits like fee-free ATMs and co-op branches.
- Banks (and especially big banks) have the products and services consumers want. Credit unions are getting better but in general their account services are inferior to banks. Case in point digital services. Banks like Chase go way beyond the basics of digital services to include services robust transfer capabilities, advanced mobile offerings, and multi-touch point self service. Credit Unions provide the basics but seldom advanced digital services consumers are interested in these days.
- Banks most profitable customers don’t pay those annoying fees. Banks best customers – the ones who provide the bank’s profitability – don’t pay fees. The banks earn money on their broad relationships, usage of revenue generating services and high balances and in turn waive monthly fees and provide most services gratis.
- Inertia is retention’s best friend. Banks may never admit it, but the biggest arrow in the quiver of bank product managers is inertia. Customers don’t move accounts because it is very hard to do so. The prevalence of online bill payment, direct deposit, and direct debits has only exacerbated the situation.
Bank Transfer Day is example of the idea being much more interesting then the reality.