Mad about the bank bailouts? Tired of nickel-and-dime banking fees or bad customer service at your local branch? Think major U.S.financial institutions are corrupt, or that mortgage practices at Bank of America (NYSE:BAC), Citigroup (NYSE:C), JPMorgan Chase (NYSE:JPM) or Wells Fargo (NYSE:WFC) weren’t above board?
Then just move your money. After all, roughly 1 in 10 Americans have already done so.
Market research firm J.D. Power and Associates said that the rate of “customer defection” from a primary bank like BofA to another institution like your local credit union was 9.6% — up from 8.7% last year and 7.7% the year before that.
One-third of those who switched said fees were the cause for the move, but “more than half customers of the biggest banks and large regional institutions who switched said fees were the main reason they looked for a new bank,” according to a Reuters report. Also the article says that, “More than half of customers who cited fees as the reason to defect said their bank had provided poor service.”
So where are these customers going? Well, according to a recent CNNMoney report, small banks and credit unions lost only 0.9% of their customers on average in 2011 — a significant decline from a 8.8% loss in 2010.
“These smaller institutions were also able to attract many of the customers who left the big banks,” CNNMoney reported. “Over the course of last year, 10.3% of customers who shopped for a new bank landed at these smaller institutions — up from 8.1% in the prior year.”
It appears that fees were the straw that broke the camel’s back. A rash of expenses nickel and diming bank customers to death have cropped up. But anyone who has been watching the growing discontent over big financial institutions over the last several years should know that it’s not as simple as the $5 debit card fee proposed – and in fact, eventually cancelled – driving folks away.
That broader mistrust of big banks and an unwillingness to give Bank of America and Citigroup the pleasure of their business is really driving American banking these days. And that’s a much bigger threat to the long-term growth potential of the sector than the Volcker rule or other such regulations and proposals.