Bancography | Branch Planning, Marketing Research, Brand Strategy, Products & Profitabilty

The Boston Globe and Banks vs. Credit Unions: A Misguided Argument

By Ron Shevlin
S
enior Analyst, Aite Group

On November 26th, the Boston Globe published an editorial titled “Big Banks Need Competition.” The crux of their PoV was:

“People are sick of finding their checking accounts shrinking because of unexpected fees… Luckily, customers who are tired of playing hide and seek with their financial institutions have another option: credit unions. Credit unions, nonprofit cooperative financial institutions owned by their members, tend to offer lower fees and higher interest rates…If consumers vote with their wallets, credit unions could apply some much-needed competitive pressure to the banking behemoths.”

On December 2nd, the Globe published a rebuttal from Daniel J. Forte, the President of the Massachusetts Bankers Association. Mr. Forte countered that:

“Our objection is not with the notion of healthy competition, but with the idea that credit unions are the solution, and with the omission of the fact that there are more than 190 banks in Massachusetts providing choice and value to consumers while providing thousands of jobs in the Commonwealth.”

Mr. Forte’s views rested on this argument:

“The Globe ignores the fact that credit unions pay no state and federal income taxes. That’s lost money that could be used to support necessary services such as fire and rescue, police, and other government programs that benefit everyone, especially in these hard times.”

Kiosk & Display | Migrate Your Digital Signage to Windows 7

My take: With all due respect to Mr. Forte, his argument was poorly constructed, and misguided.

Mr. Forte’s argument should have focused on the fact that the Globe overlooked the role of community banks — in addition to credit unions — as a competitive alternative to the “banking behemoths.” Mr. Forte does allude to 190 banks in Massachusetts, but nowhere in his editorial does he specifically make a distinction between the behemoths and the smaller institutions.

Instead, he focused on the “credit unions pay no taxes” argument. Again, with all due respect, this argument simply doesn’t win any friends. Credit unions employ people who do pay taxes. And the successful ones pay dividends which I’m sure help many people in these “hard times.” (Side note: As a Massachusetts resident myself for the past 20 years, I’ve seen little evidence that my tax dollars support government programs that benefit “everyone”).

Mr. Forte should have simply taken the Globe to task for not mentioning the role of community banks. Instead, the editorial further fans the flames of this silly bickering between banks and credit unions. The only people who care about this are people who work for banks or credit unions.

The financial services industry — as a whole — needs to rebuild trust, reinvent itself, and innovate in the development of new products and services. Instead, it comes off looking like whiny kids complaining to their mommies and daddies. (And listen up, credit union folks, because you’re just as guilty of this).

In the end, both editorials were wrong. The Globe was foolish for not recognizing community banks, and Mr. Forte was wrong for bashing credit unions instead of the Globe.


Ron Shevlin  is a senior analyst at Aite Group, and a regular contributor to The Financial Brand. He specializes in retail banking issues including sales and marketing technologies, customer and marketing analytics, loyalty management, P2P lending, personal financial management, social computing, online banking, customer experience and consumer behavior. You can read more from Ron on his blog, or follow Ron on Twitter.

Search For More: Credit Unions, Public Relations, ,

All content © 2014 by The Financial Brand and may not be reproduced by any means without permission.

CUNA Mutual | TruStage Auto & Home Insurance

Comments

  1. I’d also like to comment on this line: “People are sick of finding their checking accounts shrinking because of unexpected fees.” My mother has had an account at a certain credit union for more than 40 years. The credit union started out very small, serving only people at her place of employment, and has grown in the past four decades to be quite sizable and have multiple branches serving a far larger customer base that stretches well beyond her workplace. She recently discovered that sometime in the past few years her savings/checking account had become subject to a new fee that had literally drained her of hundreds of dollars. Lots of people pay closer attention to their accounts than my mother and probably would have noticed sooner. There may have even been a mention of it somewhere on a notice that she just never read. I can’t say. But what I can say for sure is this: There are credit union customers who are “sick of finding their checking accounts shrinking because of unexpected fees.” It’s not just happening at banks.

  2. MZ — Anecdotal evidence is irrelevant here. Just look at the statistics on banks vs. credit unions. Credit unions, in general, have significantly better interest rates and lower fees than banks do. This is a fact.

    Yes, some credit union customers have had bad experiences. Nobody claims credit unions are perfect. But credit union customers are much LESS LIKELY to have bad experiences. Credit unions are a better choice, even if they aren’t perfect.

Speak Your Mind

*

Next article recommended for you