June 21, 2012 at 10:22 AM ET
Successful businesses know how to make their customers happy. Apparently, many of the nation’s big banks still have not learned that lesson. A new report from Javelin Strategy & Research shows a high percentage of account holders are unhappy enough to consider pulling their money.
The report concludes that the banking industry “remains highly vulnerable to switching” as customers weigh fees and convenience.
About 11 percent of the people surveyed in March 2012 say they are “very likely or likely” to switch financial institutions in the next 12 months. Javelin says these “vulnerable customers” are valuable customers. They manage a total of $675 billion in deposits. Even more significant, their average deposits are 30 percent higher than customers who have no intention of leaving.
The report says customer dissatisfaction runs high at four megabanks: Bank of America, Chase, Citibank and Wells Fargo. But Citibank and Bank of America have a “far higher risk” of losing customers than their rivals.
“Those two banks have double the vulnerability of banks overall,” says Javelin senior analyst Mark Schwanhausser.
About 25 percent of Citibank customers and 21 percent of Bank of America customers told Javelin they are “very likely or likely” to switch primary financial institutions in the next year.
Bank Transfer Day fizzled, but …
Remember November 11, 2011? It was the day American consumers were going to teach the big banks a lesson. We’d make them pay for their arrogance and ever-higher fees by moving our money to community banks and credit unions.
The Javelin report calls Bank Transfer Day “a bust” because only three percent of the country’s bank customers switched financial institutions during the fourth quarter. The report says that rate was unchanged from the previous quarter and “generally consistent” with previous periods.
“Certainly people opened up accounts at smaller institutions, maybe added some deposits, and many credit unions are happy as a result of that,” Schwanhausser says. “But from the viewpoint of where do people do most of their banking, they stuck around at the same places.”
It seems changing banks is a lot like moving. You hate the leaking faucets and the old carpet in your apartment, but you just can’t deal with the hassle of packing up everything.
In a report released last month, Consumers Union said customers face a series of obstacles that make it a hassle to change banks. It can be a pain to switch direct deposit and automatic bill pay transactions. There may also be a fee to close the account.
Consumers Union visited the websites of the top 10 banks and found that they don’t give clear instructions about how to close an account. In many cases, secret shoppers who contacted the banks got conflicting advice from different representatives of the same bank.
"When it's too much of a pain to switch banks, then where is the incentive for the big banks to keep prices competitive or offer the kind of services you want?" asks Consumers Union staff Attorney Suzanne Martindale.
Javelin found that people are willing to pay for specific bank services when they believe they’re getting something for their money. These include money orders, cashier’s checks, safe deposit boxes and mobile deposit (where you take a picture of a check and deposit it).
The giant banks are still the first place people look to for the convenience of branch locations and ATMs. But Javelin tells them not to get complacent, because large numbers of customers are not happy.
The report says to remain successful, financial institutions big and small need to emphasize self-service technology, such as online banking, bill pay, personal finance management, financial alerts, and funds transfers. Mobile banking, mobile deposit, and mobile-imaging capabilities are also considered important because they give customers anytime/anywhere control of their money.
My two cents
Yes, it takes time a little time and it may cost you a few dollars to switch financial institutions. But if you don’t like the one you have, find a new one. Bank protests won’t bring about change. If you really want to send a message: vote with your wallet.
For consumer tips on switching banks, see Consumers Union’s Move Your Money Checklist.
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