What’s preventing people from switching banks? And what can retail financial institutions do to make it more likely that consumers will move their money? This report has the answers.
Nearly one-fifth of all consumers with checking accounts considered switching to a new financial institution over the past 12 months, according to a new Consumer Reports National Research Center survey. The study found that those consumers wanted to change banks largely because of frustrations tied to fee increases on routine services.
The study also concluded that the burdens involved with transferring automatic payments and other factors kept half of those potential switchers from pulling the trigger.
“Unfair bank practices and rising fees are prompting more and more consumers to consider voting with their feet and taking their money to another bank or credit union,” said Suzanne Martindale, staff attorney for Consumers Union, the policy and advocacy arm of Consumer Reports. “But many consumers don’t follow through because moving your money takes a lot of time and money and some bank policies make it harder than it should be. We need to make it easier for consumers to switch banks so they have a real choice when it comes to where to keep their money.”
The Grass Looks Greener
According to the Consumer Reports survey, 19% of checking account holders had considered switching their accounts to a different bank within the past year. Consumers who considered switching were asked to name the top two reasons why they wanted to move their account to a new bank. Among the most frequent reasons chosen:
- 43% cited fee increases for routine services.
- 38% said another bank was offering better terms.
- 26% pointed to poor customer service experiences.
One research firm specializing in the banking industry found that 11% of all U.S. consumers threatened to switch their primary financial institution sometime in 2012. But that number jumped to as high as 25% at Chase, and 21% at BofA.
The 2012 World Retail Banking Report survey from Capgemini and Efma found that 65% of banking consumers say they are satisfied, but only 51% say they have no plans to switch. Only 7% of U.S. banking customers said they were “very likely” to make the switch in 2012.
Switching Is a Major Hassle
Of those consumers who considered switching banks, over half said they were hindered from doing so. Survey respondents were allowed to cite multiple reasons for why they didn’t switch. Among the top responses:
- 63% said that concerns about the trouble it would take to transfer all their automatic payments and deposits to a new account kept them from switching banks.
- 37% indicated that the process would take too much time and effort to complete.
- 28% said they didn’t want to pay any fees to transfer their own money.
How Banks Can Make Switching Easier
Consumers Union has called on Congress and the Consumer Financial Protection Bureau to consider a number of reforms that would make it easier for consumers to move their money and increase competition among banks. The Consumer Reports survey found that a number of these policy recommendations would make consumers more likely to switch banks. Among consumers who considered switching but couldn’t for various reasons:
- 47% (basically half) said that a free, same-day electronic transfer of funds from the old bank to the new bank would make them more likely to switch.
- 37% said that they would be more likely to move their money if their old bank was legally required to reroute all automatic payments or direct deposits to the new account in 14 days.
- 32% indicated that they would be more likely to switch if they had a portable account number that they could take with them to a new bank, just like a mobile phone number.
Consumers Union has also recommended that banks should be:
- Required to reduce check holds so consumers can quickly access deposits in new accounts
- Prohibited from reopening accounts after consumers close them
- Required to provide customers with clear and accessible account closing procedures
- Prohibited from assessing unfair fees for closing accounts.
Obviously not all these recommendations are well-received by bankers.
The Consumer Reports National Research Center survey was conducted in May 2012 using a nationally representative probability-based online panel. Surveys were completed by 1157 adults aged 18+. Analyses were conducted with the sample weighted to reflect national demographics. The margin of error for the full sample is +/- 3% points at 95% confidence. The margin of error is greater for subgroups.
Trapped At The Bank
A Consumers Union report, “Trapped at the Bank: Removing Obstacles To Consumer Choice In Banking,” published earlier this year detailed a number of issues that can make switching banks a hassle. The 24-page white paper outlines a number of obstacles banks and credit unions could fix in the switching process.