Study Raises New Questions About Bank Transfer Day Fee-asco
Few things have captured the banking world’s attention more than Bank Transfer Day. Indeed the Credit Union Times has published no fewer than 90 different articles on the subject. But few topics stand to benefit more from the kind of clarity research can bring than the hulaballoo surrounding last year’s bank switching frenzy. Fortunately, Javelin Strategy & Research has done just that.
Based on a survey of 5,800 people, Javelin estimates the number who moved their money from any financial institution — bank or credit union — for any reason during the last 90 days of 2011 was 5.6 million individuals. 11% of those, or approximately 610,000 people, cited Bank Transfer Day as the reason.
26% of switchers stated that they made the move because their bank charged too many fees.
But was the level of switching activity seen in 2011′s final quarter abnormal? No, says Javelin.
“The total volume of those who left their depository financial institution during Q4 was not very different than in previous measurement periods,” said James Van Dyke, President and Founder of Javelin. However, Van Dyke adds this caveat: “We believe total bank-switching would actually have gone down had Bank Transfer Day not been so heavily promoted.”
The Javelin study would appear to redeem CUNA. The credit union association at first estimated the volume of Bank Transfer Day switchers around 650,000, a number remarkably similar to the one Javelin came up with. But CUNA then backpedalled, saying the total was less than a third of that. The trade group revised its numbers significantly downward, putting the number of new members joining credit unions during that period at only 210,000.
Now of course, Javelin’s figure of 610,000 Bank Transfer Day switchers includes those who joined credit unions… as well as those who moved to other banks (presumably community-based).
So how many people really did join credit unions in Q4 2011 in connection with Bank Transfer Day? Maybe around 485,000, but we will never really know for sure.
Why didn’t more people make the switch?
Research has shown again and again that people neither like- nor trust big banks. When so many people hate big banks, it should hardly seem surprising that 610,000 of them switched. The real question is why didn’t more people make the switch, especially while inertia was at its weakest?
Community financial institutions rushed to commend themselves for the sudden surge in new business they saw in last year’s final quarter. To them, 610,000 people might mean a lot. But you have to remember: Big banks like BofA have over 40 million deposit customers. Collectively, the four megabanks — BofA, Citi, Chase and Wells Fargo — have a relationship with practically everyone in the U.S. So if they lost a combined 610,000 customers over Bank Transfer Day, they didn’t even lose even 0.3% of their customer base. That’s works out to only about 1 defection for every 400 big bank customers.
“This was certainly not the massive departure banks might have feared,” he said. “We didn’t see any individual bank punished out of this more than the rest.”
Van Dyke thinks he knows why more consumers didn’t make the switch. He says consumers may have a sincere affinity for community-based financial institutions, but they feel trapped by the technologies they want — technologies that only bigger banks seem to offer.
Van Dyke says potential switchers have significant concerns about the overall downgrade in electronic capabilities that await them at community institutions.
“Young, idealistically-minded people might love small banks and credit unions,” he says. “But data show young people in particular love the technology at large banks even more.”
“Our data clearly show that smaller financial institutions are beloved by all Americans,” he continues. “Yet our benchmarking analysis show that the larger players are delivering on specific emerging capabilities that span online, mobile and social channels.”
“If young consumers are willing to stand in line through the night to get the next version of an iPhone, they’ll become fans of a financial institution that gives them a similar experience.”
That mobile and online technologies are in short supply at credit unions “should be raising alarm bells” in CU board rooms, Van Dyke warns. If credit unions don’t focus their attention in digital directions, he fears they may go the way of the Oldsmobile.
Van Dyke also credits banks’ age old friend inertia for reducing customer churn at big banks. “It turned out that technology and inertia really won the day in favor of the large banks,” Van Dyke says.
Given the technology shortcomings at credit unions and community banks (real or perceived), it’s odd that Van Dyke was surprised Bank Transfer Day switchers were predominantly not the young, low-income urban hipsters associated with Occupy Wall Street. In actuality, Van Dyke’s research found that those who left large banks in favor of a credit union or community bank due to Bank Transfer Day trended towards higher incomes. Otherwise, they were unremarkable.
“Mostly, they just looked like everyday Americans, but perhaps with a slightly fatter wallet,” Van Dyke said.
Now of course, some big bank customers will always be switching. One-size-fits-all transaction factories invariably anger and frustrate a certain number of customers every month. It’s statistically unavoidable, which leaves big banks continually walking the tightrope between attrition and inertia.
So what can bankers do who want to improve income without alienating customers? Javelin says they need to move from a revenue model that is primarily punitive (such as overdraft, insufficient funds, etc.) to one that is proactive. Javelin says this applies particularly to larger banks, where it is even more important to “get people feeling good about paying more for more.”
Who is Molly Katchpole and Why Should You Care?
One particularly fascinating aspect of the 2011 bank switching narrative is how the story was spun. To this day, news organizations still love giving credit to Bank Transfer Day and its originator, Kristen Christian. At her Facebook page, Christian managed to get 60,000 people committed to switching on Bank Transfer Day. Meanwhile however, an online petition against BofA’s $5 fee started by activist Molly Katchpole gained over 300,000 signatures. And yet few media outlets ever reference Katchpole. Why is that?
A quick scan of Google returns only 50,000 results for Katchpole’s BofA petition. If you search for just “Molly Katchpole,” you’ll be lucky to find 200,000 results. Now keep in mind, Katchpole has started a number of online viral protests, including a revolt against Verizon’s proposed $2 fee that attracted 167,000 signatures almost overnight.
Bank Transfer Day, on the other hand, yields over 20 million references on Google.
Again, why is that? Why did the media shun the arguably more successful Katchpole for Kristen’s Bank Transfer Day creation? Why doesn’t Katchpole get any credit when she mustered five times as much support for her cause? Probably because Katchpole’s petition didn’t have a catchy name. If there’s a lesson here for viral marketers, it’s that you had better coin a good, Googleable phrase. But not even then is success guaranteed, as the Move Your Money project’s dismal performance proves.
In Javelin’s study, 11% of switchers cited “Bank Transfer Day” as the reason they left their financial institution. In all likelihood, what the data really signifies is an 11% awareness level of the “Bank Transfer Day” phrase among switchers. Without the media whipping up such interest in Bank Transfer Day, that same 11% would likely have fell into the “unreasonable debit card fee” camp.
Bottom Line: Most of the people who switched financial providers during Q4 2011 probably would have done so anyway, whether or not Katchpole created a petition or Christian organized Bank Transfer Day.
Search For More: Facts & Data, BofA, Chase, checking, Citi, CUNA, deposits, fees, Javelin, Wells FargoAll content © 2013 by The Financial Brand and may not be reproduced by any means without permission.
Jeffry, I always enjoy your writing whether I agree or not. It’s what makes the world go ’round. This time, I definitely have some problems with your logic.
First you cite Javelin saying the number of consumers that switched accounts was not up much from previous Q4s but it was up. You go on to cite Javelin saying it actually expected switches to decline in Q4 prior to Bank Transfer Day. So really, the number of switches was up quite a bit from what was expected if I’m reading that correctly.
Second, I don’t think anyone really believes Bank Transfer Day was the cause of the switches. BofA’s $5 fee was the cause of Bank Transfer Day and many of the switches. The coining of Bank Transfer Day was symbolic and raised awareness.
Finally, SEO is important if you’re running anything online as you well know, particularly something like a petition to stir up a viral movement. Yes, Katchpole could have come up with more SEO friendly name to get found out and probably would have captured even more signers for her petition as well as media attention. But you also contradict yourself on the point of a “catch name,” here: http://thefinancialbrand.com/20199/bank-transfer-day/
But a question about this stat: “Collectively, the four megabanks — BofA, Citi, Chase and Wells Fargo — have a relationship with practically everyone in the U.S. So if they lost a combined 610,000 customers over Bank Transfer Day, they didn’t even lose even 0.3% of their customer base.” Does that cover strictly consumer banking? Bank of America alone has banking relationships with 99% of Fortune 500 companies and 83% of Fortune Global 500 companies, which accounts for much of their business. These aren’t the types of accounts that have their pick of institutions to handle their banking.
Thanks for keeping debate alive,
Sarah
@Sarah – Regarding switching volumes, you’ll have to direct your questions at Javelin. I don’t have access to their data. They are the ones who said switching occurred at a higher-than-expected rate. What amount of switching activity did they anticipate for Q4 2011? They didn’t say. Why did they expect switching volumes to be lower? Again, they didn’t say. But to paraphrase Javelin’s take on the situation: “We expected fewer switchers in Q4 than we saw, but the number we saw was not uncharacteristic for the final quarter in any given year.”
Regarding your second point, the Javelin study said 11% of consumers who switched did so because of Bank Transfer Day. While I agree with you — Bank Transfer Day was not a root cause of increased switching — that isn’t what the study concluded.
I don’t see the article about the lameness of Bank Transfer Day’s name contradicting anything in this article here. All the previous story said is that Bank Transfer Day could have had a better name. The article published here points out that having no name (e.g., “sign my petition”) will not be as successful as something having a unique name (“Bank Transfer Day”). That Bank Transfer Day is a unique name making it more Googleable does not mean it is a great name. The point is that by having a non-generic name, Bank Transfer Day gained more media traction than its generic-but-more-successful counterpart.
Regarding your final question: No, the statement you quoted does not apply to consumer banking exclusively. The point is that nearly every American has at least one type of relationship with a big bank (loan, credit card, DDA), despite the fact that so many say they hate such financial institutions. There are over 320 million people in America. The Financial Brand estimates that as many as 200 million Americans (63%) have some sort of DDA relationship with a big bank, but there really isn’t any data to confirm or refute this. 0.3% of 200 million is 610,000.
Thanks for sharing the study.
Great observation with the 11% awareness level of BTD stat in the survey. By comparing the google trends data you can see that the search volume for “bank transfer day” was inflated and driven by the media coverage.
Bank Transfer Day
http://www.google.com/trends/?q=bank+transfer+day&ctab=0&geo=all&date=ytd&sort=0
The search volume is very peaked around the 4th which is when the bulk of mainstream press exposure was made.
Vs.
Bank of America debit card fee
http://www.google.com/trends/?q=bank+of+america++debit+card+fee&ctab=0&geo=all&date=ytd&sort=0
Really from an SEO stand point you could argue that Molly’s name was more effective, because it was directly related to the issue of consumer anger BOA’s $5 fee, but she likely generated more sign ups because of viral traffic than search traffic.
At the end of the day what should be most important to the CU industry is this chart
What is a credit union?
http://www.google.com/trends/?q=what+is+a+credit+union&ctab=0&geo=all&date=ytd&sort=0
notice the peak that aligns with the fee and the BTD coverage. Consumer awareness and interest in CU’s was raised that week and that’s going to have a more positive and long term effect than any amount of account transfers from that week.
@TheFinancialMarketer – Thanks for sharing. Very interesting. You’ve gotta love Google Trends.
Ah, TFB. You make me smile.
I was checking my email over a bowl of yogurt, granola, and pineapple this morning, and I couldn’t help but laugh out loud when I saw this article featured in your latest blast. Actually, it was the entire “featured article” experience that caught me by surprise: the BTD image, the reference to the “cold hard facts,” and of course, the play on words with “fee-asco.”
I’m not sure if laughter was really what you were going for when you chose said image and title, but it did get me to click through and read the story in its entirety.
I completely agree with the numbers, your argument about technology, and catchy names, but do really think that BTD was a “fiasco”? Your article’s title certainly implies that you do, but the content of the article doesn’t seem support that viewpoint. Aside from your use of the word “hullaballo,” it wasn’t the passionate, I-know-where-the-dead-bodies-are-buried article I was expecting. Don’t get me wrong! It was extremely well written and very refreshing, but I guess it’s like you said, “…we will never really know [the answers] for sure.”
For me, BTD was about generating awareness. Yes, it had its flaws, but what movement doesn’t? Maybe it didn’t deserve as much play as it got, but at least someone spoke up and got (some) people to look. It’s like my boss always says, “There are two types of people in this world: creators and editors. The editors will always critique what you create, but you’re the one that took the initiative to do something in the first place.”
Thanks for the enjoyable morning read.
Kimberlee
@Kimberlee – The headline’s reference was to BofA. If not for the “fee-asco” BofA created, Bank Transfer Day would have never existed. The two are inextricably linked. Is there too much packed into this single headline? Perhaps.
Why are you trying so hard to prove this movement was flawed? Is it because you blogged it would fail beforehand and you really want to prove you were right? Focus on the other great things you report on and please move on (said very sweetly only you can’t hear me).
Either you trust Javelin research or your don’t – can’t do both. If their research says 11% surveyed SWITCHED because of BTD – are you seriously questioning their 9 year qualitative and quantitative surveying process on this very topic (bank transfers) by saying they are mistaken and those surveyed merely meant they were AWARE of the movement? They didn’t just decide to survey people because of this movement. It’s a long time process and they report a change was indeed seen because of BTD. Love you – but I trust their data and reporting over your need to prove this movement was a bust.
Local note: They two credit unions I support indeed saw new members during the week of BTD. But even more importantly: internally they see a need to improve their online sign up process, offer weekend and longer evening hours and their customer service overall. This specific event was brought up in strategic planning meets (not by myself but board members). BTD was not just last Nov. It brought up great things that needed attention.
@Bobbie – It’s about cause and effect. The effect — that some number of people switched to credit unions — is undisputed. The cause, however, remains open for interpretation. What would Bank Transfer Day have been had it not been for BofA’s $5 debit card fee? One could argue that the real (and perhaps only) impetus for increased switching behavior is attributable to BofA’s fees. How many of these people would have switched whether or not Bank Transfer Day had ever been created?
In all fairness, The Financial Brand never said Bank Transfer Day would fail. Critical and analytically skeptical? Yes.
Here is an excerpt: “Certainly smaller financial institutions across America will see some lift in new accounts throughout the fourth quarter, but it’s unlikely much credit will be owed to Bank Transfer Day… Bank Transfer Day isn’t likely to push very many people to close their bank account.”
Is that a prediction of failure? It depends on how you view the data, and your qualitative standards. 9 out of 10 people who switched didn’t cite Bank Transfer Day, 1 in 10 did — that’s only about 1 in 400 big bank customers. Does that amount to “much credit?” Maybe. Is 610,000 people “very many?” Perhaps. Again, it depends on your perspective. Credit unions see it as a big win. Big banks would probably say it stung a little, but who needs fee-sensitive deposits anyway?
I’m sorry you’re disappointed with The Financial Brand’s analysis, however I believe previous coverage of Bank Transfer Day has been fair. Was Bank Transfer Day flawed? Was it a failure? I don’t think that’s the takeaway. For credit unions, its primary value was as a PR tool, no doubt about it. From a PR perspective, BTD was a boon for CUs and a bane for banks. But as a “switching event,” could Bank Transfer Day have been better? Could it have had a much bigger impact? Aren’t those fair questions?