Measuring the Impact of Bank Transfer Day

Saturday November 5th was Bank Transfer Day, the day on which Americans were urged to switch their accounts from the big banks to credit unions. For a grassroots movement started by art gallery owner Kristen Christian on Facebook, it garnered a lot of media attention. Just as one example, on Friday evening November 4th, I spent an hour as a guest on KGO Radio in San Francisco as host Gil Gross took calls from listeners, many of whom reported they had already moved to a credit union or planned to do so.

Was Bank Transfer Day a Success?

Last week the Credit Union National Association released figures that an estimated 650,000 people had joined credit unions since Sept. 29 (the day Bank of America unveiled its now-rescinded $5 monthly debit card fee) and had added an estimated $4.5 billion to new savings accounts at credit unions, both from new and existing members.

[Related Article: Want to Switch Banks? Here’s How to Do It.]

On Tuesday, the association said that more than 40,000 people joined credit unions on Bank Transfer Day itself, bringing with them $80 million in assets. One credit union in Georgia reported a 60-percent jump in new accounts on Nov. 5.

However, Javelin Strategy & Research senior analyst Mark Schwanhausser notes that generally the numbers of consumers switching primary financial institutions has been declining. In the March 2009 survey, which reported data from the previous twelve months, 11% of consumers had made a switch. In the 2010 survey, that figure was 12% and in the 2011 survey, it dropped to 7%. Perhaps this recent movement will reverse the trend.

InstitutionalRiskAnalytics.com offers a free tool that allows consumers to locate banks (including smaller community and regional banks) in their area, along with information about safety and soundness of those financial institutions. It received what he describes as “massive traffic” in early 2010 when the free tool was featured in the Move Your Money effort. Move Your Money was spearheaded by a video created by filmmaker Eugene Jarecki and publicized by Arianna Huffington, among others. But Institutional Risks Analytics CEO Dennis Santiago says he didn’t see the kind of traffic he expected this past weekend.

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Describing traffic to his site between Thursday through Sunday, Santiago says, “Total event count-wise, it peaked at about 10,000 querying the system (which was) nowhere near the size of the numbers when Move Your Money was taking place in 2010.” By contrast, the Huffington Post reported that in the first seven days of the Move Your Money campaign in January 2010, there were 340,000 searches for community banks.

Santiago also notes that in recent searches, visitors were by and large looking up banks, rather than credit unions, at a ratio of 5 to 1. “Interestingly enough, the fewer cases where there were people looking at the credit unions there was a higher incidence of people looking at the second page with a full list of branches,” he says, and speculates that “the people who took the time to look at the credit unions we’re pretty serious about it.”

What likely happened is that those web surfers were heading over to the credit union locator website, ASmarterChoice.org. Mark Wolff, Senior Vice President-Communications for the Credit Union National Association reports that site “recorded about 70,000 visitors on Friday—an all-time high—and another 62,000 on Saturday. We had been averaging 2,000 to 3,000 visits a day. During one two-hour period, we had more than 17,000 visitors come to aSmarterChoice.org—which temporarily froze our search tool—but we got it back up and running within the hour.”

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American Banker’s Association spokesperson Carol Kaplan says that its own data on the impact of Bank Transfer Day is not available yet, and won’t be available for at least a few more weeks. A Bank of America spokesperson reported that information about deposits is only reported with quarterly financial results.

The Word on the Street »

Image: dubnars, via Flickr.com

The Word on the Street

Commenters on Facebook and blogs shared a variety of experiences about Bank Transfer Day:

• Writing on the New York Times Bucks blog, Allison from San Diego California said, “I opened a new credit union account a few weeks ago so that I could drop my Wells Fargo account last Saturday, Bank Transfer Day. The woman that I spoke with at Wells Fargo was clearly aware of the occasion.”

• On the Bank Transfer Day page on Facebook, James Carvalho wrote, “I’m out of town now but when I get back home I’m going to open an acct. with a local bank and close my BOA acct.”

• Melanie Duvall posted, “My son just enlisted in the Marine Corps, so I’m switching from SunTrust to Navy Federal Credit Union.”

[Related Article: Not Your Grandmother’s Credit Union]

Wolff says that CUNA is hearing from credit unions about new members that came in on Saturday:

• BECU in Seattle had about 660 new people open accounts Saturday at just one of its 45 branches—a record for Saturday traffic at that branch.

• Redwood Credit Union outside of San Francisco had 75 new people join on Saturday, and said its parking lot was “jammed” with cars. Redwood said it has experienced an 83% increase in new members compared to this time last year.

• Pennsylvania State Employees Credit Union said it opened 153 new accounts on Saturday, which is 50% above its normal average.

Schwanhausser wonders how many people said they would switch, but then either failed to follow through, or gave up when they tried to open an account online. Javelin research shows that 60% of consumers abandon the process when trying to open new accounts online. And if credit unions or community banks aren’t offering a full range of online and mobile services, the most loyal customers—the “money hawks” as he calls them—may not even bother to move.

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Will it Make a Difference?

According to the American Banker’s Association, checking accounts at FDIC-insured banks held $1.172 trillion (at the end of the second quarter of 2011), and $5.188 trillion was sitting in savings accounts. But the average consumer bank non-interest checking account balance, according to Pitney Bowes Business Insight, is just $2,947, and the average consumer savings account is $5,753. Will the big banks even feel the loss of these small accounts?

If consumers do in fact switch, then “yes,” says Schwanhausser, who notes a recent Javelin study that found that banks are typically willing to pay $150 to acquire a new customer. Additionally, he says, banks also benefit from the long-term relationship with customers and potential profits from cross-selling them on other products.

Losing smaller accounts will impact large banks, says Santiago, because these smaller balance customers tend to be loyal, and their deposits are considered “stable” money. “I think what’s happened is that while the total dollars moving is small, the sophistication of the customer is rising. If you have smarter customers you’re going to be a smarter bank.” The Bank Transfer Day movement could provide additional pressure on large banks to become more competitive, he says.

And he may be right.

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American Banker reported that SunTrust Bank dropped a $5 monthly debit card fee it had instituted earlier this year. Some have suggested that the reversal wasn’t primarily the result of Sun Trust customers’ complaints, rather the backlash against the Bank of America fee is what drove the bank’s decision.

Consumers “are voting right now,” Schwaunhauser says. “We’re just waiting for the ballots to be counted.”