Much has been made of the “Move Your Money” campaigns of late 2011 to convince high-minded folks to close their accounts with big banks and move to little credit unions. However, when it comes to the rest of us, we’re just interested in staying with a bank that treats us and our money right. That said, the media hubbub has caused many of us to wonder what really causes people to switch banks. Most of us just signed on for whatever bank was offering us the best credit card deal in our impressionable college years – we didn’t have a clue how banks were different.
But money’s tight these days, and even major banks are shaking up their business models to become more efficient. As business models change, so too do people’s banking habits. But time is money, and when you place your money in a bank, you are paying for a service and making an important investment.
It turns out that the “do they invest in things that may be bad for the environment/developing world/insert-your-pet-cause-here” isn’t necessarily a good indicator of the financial strength of a bank, and there are plenty of valid reasons to re-assess your bank’s fit.
Major Life Events
A recent article in the Financial Brand suggests that the number one reason that people switch banks is due to a major life event. Surprisingly enough, a bank account is a bank account for most people. It’s where you keep your money until you can’t keep it there anymore. Common reasons for closing an account include making a cross-country move to find a new job, a divorce and subsequent dissolution of a joint account, or marriage and subsequent opening of a new account. It has little to do with the million-dollar marketing budget and everything to do with what’s convenient given the new situation.
Change in Convenience for Customer
If a bank closes any of its branches, it’s a good bet that a chunk of that branch’s patrons will switch to other banks. People are creatures of habit, and we get a foul taste in our mouths if someone breaks our habits. Banks attempting to “streamline” business by closing branches often get more than they bargained for, because people like having their neighborhood branch location.
Changing Internal Processes and Impact on Customer Service
It’s on everyone’s mind these days – customer service sucks, nobody cares about the little details, and the human touch is all but gone from modern banking. This is often the result of internal processes designed to streamline efficiency and reduce payroll or operating costs, such as the employee assessment from Halogen, which reduces waste and helps the company stay in the black.
Banks, however, must tread carefully to make sure that these improvements in efficiency don’t alienate long-time customers by reducing the quality of customer service. Computers are great and all, but in the end, the human touch may be necessary to keep customers from switching and keep profits rolling in.
Strange New Fees
Wells Fargo is just one of many big banks that will, beginning in May 2012, begin charging a monthly fee for a checking account unless you have over $7500 in it. Other banks are implementing similar high minimum balances for no-fee checking. Surprisingly, the Financial Brand article didn’t ascribe as much importance to bank fees as it did to life events or decreased convenience when discussing the reasons why people switch banks, perhaps indicating that people like to complain about their banks, but when the fees start to hit, most will just settle down and deal.
If you’re in need of quick cash back or a good rate offer and if you just happen to have a weekend free, the right advertisement in the mail may convince you to switch banks. This isn’t necessarily a smart money move, but if you want the quick promo offer Right Now, consider it a well-played ad campaign by your new bank. It takes a strong ad to pull someone away from his or her bank.
Customer attrition in banks is a serious problem that many bankers are trying to find how to solve. Sometimes it’s as simple as making sure to smile when a customer asks a question or show interest in solving a customer’s problem. Other times, it may seem to require you to know more about your customers’ plans than they themselves do. How are you to know that a mis-placed overdraft fee will be the “straw that broke the camel’s back” and cause the customer to close his account? Most of that stuff is automated by now, anyway.
How about you? Are you considering switching to a different bank? What would make you decide to move your money?