A Snarketing post by Ron Shevlin, Director of Research at Cornerstone Advisors
Well, Bank Transfer Day has come and gone.
Actually, I doubt that it really has “gone” as I’m sure that credit unions will do everything under the sun to keep the glow of the Bank Transfer Day movement a-burning.
Ironically — and I don’t hear anybody else talking about this — credit unions might not have been the only financial institutions to have benefited from BTD. And I’m not referring to the “shedding of unprofitable customers” that some people talk about.
Anecdotally, I’ve talked to a few folks at mid-sized banks who have told me that they’ve seen pretty good growth in new customers over the past month or so.
But that’s not what this blog post is about. This one is about the Wall Street Journal.
I’m a big fan of the WSJ. Read it every day. Agree with the editorials far more often than I disagree with them. But when some press outlet screws up — whether I support it or not — regarding something related to the world of financial services, then I’m going to call them out over it.
And that’s what this blog post is about — calling the WSJ out regarding an article titled Credit Unions Poach Clients (you may need a subscription to access this article. Surprise, surprise, I have one).
Here’s are the issues I have with the article:
1. Credit unions did not poach clients. According to my handy (online) thesaurus, “poach” means infringe upon, trespass, or boil lightly. Sorry, but credit unions didn’t do anything of these things. I’m pretty sure that the new members that credit unions have signed up in the past month came over willingly. I also don’t think that credit unions went over to banks and “trespassed” in any way. And if you know of any credit unions that lightly boiled their new members, please — PLEASE — let me know.
2. Profitability of switchers is an unknown. The WSJ article claims that “people who gravitate to credit unions tend to be unprofitable for giant banks because of the small balances they keep on deposit…” Not so fast. Take a look at the report I did for BancVue. There are many credit unions — and community banks — who offer high-yield checking accounts (Rewards Checking) where the average balances are about 4x the size of free (no-interest) checking accounts, and whose profitability exceeds that of the free checking accounts. According to CUNA, 650k new accounts were opened at CUs leading up to BTD, with $4.5 billion in new deposits generated. That’s nearly $7k/account. Not exactly “small balances.”
3. CUs charge fees, too. The article says “banks try to recoup such costs [to maintain a checking account) by imposing overdraft fees and other charges.” While credit union members may — on average — pay less in fees than the average bank customer (let’s not get into the quantipulation inherent in that statistic), guess what WSJ? Credit unions charge an overdraft fee, too.
4. Banks are everywhere, man. Johnny Cash shoulda done a song on this. The WSJ quotes a guy from NCUA (which it says is a trade group, which isn’t accurate according to @paulsworld) who says “many of the nation’s 7,200 credit unions are in rural areas where there is no other banking option.” I don’t think this is a supportable statement.
5. The housing bubble comment was a poor choice. The article states that “several large commercial credit unions…went bust after loading up on high-risk mortgages during the housing bubble.” True statement. But in comparison to the impact the housing bubble had on banks, calling out the impact on the credit union industry was pretty manipulative.
C’mon WSJ: We expect a lot better from you.
p.s. If you want a copy of the report referenced above Financial High Coup: Why High-Yield Checking Accounts Trump Free Checking, contact BancVue.