Customers holding hundreds of billions in deposits at Citi, BofA and other big banks are up for grabs. Regional- and community-based financial institutions smelling opportunity will be circling like sharks.
A report from Javelin Strategy & Research reveals that 11% of all U.S. consumers are threatening to switch their primary financial institution sometime in 2012. The biggest banks face even larger defections, with Citi and BofA at risk of losing twice that many customers. Javelin predicts the five largest U.S. banks could see as much as $675 billion in potential lost deposits.
These prickly big bank customers should be easy pickings for smaller financial institutions.
Compounding revenue challenges for retail financial institutions, likely switchers also say they are only willing to pay fees for a very narrow range of services — four in total: money orders, cashier’s checks, safe-deposit boxes, and mobile deposit. Javelin estimates that the revenue opportunity among likely switchers to total around $92 million.
More than half of recent switchers are under 35 years of age and use mobile technologies (smartphones and tablets) frequently. Indeed, mobile banking has emerged as a compelling factor for switchers. They more than twice as likely as all consumers to use mobile banking. In Q4 2011, 10% of those who switched banks cited availability of mobile banking as one of their top three reasons. In 2010, that number was only 4%.
Javelin says financial institutions of all sizes have a chance to capitalize on the billions at stake, but to take full advantage, they will need to re-engineer their customer acquisition and retention strategies along with their product lines.
Smaller banks can play to their strengths of lower fees, convenience, and customer service, says Jim Van Dyke, President, Javelin, but adds that they will need to beef up their mobile banking and mobile deposit offerings.
Bank Transfer Day a Bust, But Offers Lessons
Mark Schwanhausser, Senior Analyst, Multichannel Financial Services at Javelin isn’t afraid to label Bank Transfer Day a bust, but he believes everyone in the retail banking space has lessons they can learn from it. “Banks are still in danger of losing customers to financial institutions that can better respond to their needs, especially in the areas of mobile banking and self-service technology.”
“Ultimately, consumers are driven by convenience more than fees and protests,” Van Dyke explains. “Giant banks will need to drive home their messaging around convenience, mobile banking, and other services that smaller banks don’t — or can’t — offer.”
How To Get Your Copy of the Report
Javelin’s report, ”Bank Switching in 2012: Giant Banks Remain Highly Vulnerable,” examines the factors behind why customers stay — or leave — their primary financial institution, and recommends specific strategies that retail banks and credit unions (both large and small) can use to compete and capture these switchers.
The 31-page report is based on three online surveys ranging between 4,800 to 5,000 participants each.
Javelin Strategy & Research provides strategic insights into customer transactions that increase profits for financial institutions, payments providers, merchants and other financial technology companies.
Javelin’s independent insights result from a uniquely rigorous three-dimensional research process that assesses customers, providers, and the transactions ecosystem.