Anger against mega-banks brewed for most of last year, coming to a head with the Occupy Wall Street protests and fueled by banks’ unpopular (and short-lived) efforts to charge people for using their debit cards. People claimed they’d vote with their feet and switch to a smaller bank or a credit union, prompted by movements like the Facebook-driven Bank Transfer Day. But then a funny thing happened: Most people didn’t wind up switching banks after all.
Does this mean we’ve embraced the “too big to fail” banks? Far from it; a pair of new studies show widespread dissatisfaction among customers of giant banks.
Overall, 11% of bank customers say they plan to switch banks, according to Javelin Strategy & Research, but this number is higher — in some cases, much higher — for the nation’s largest banks. Javelin says an “astounding” 25% of Citibank customers and 21% of Bank of America customers in a recent study say they’re likely or very likely to change banks within the next year. For Wells Fargo and Chase, those figures are 14% and 12%, respectively.
Only 69% of people say they’re satisfied with service at big banks, a lower percentage than for regional banks, community banks or credit unions (which have the highest satisfaction rating at 92%).
As fraught as our banking relationships are in the U.S., though, Europeans seem even less satisfied with their financial institutions. In a survey of global banking customers, consulting firm Ernst & Young found that consumer confidence in banks in Spain and Italy dropped by more than 70%. Worldwide, its research showed similar sentiments to Javelin’s study, with 12% of customers planning on leaving their banks. Half of these departing customers plan to leave because of fees and other costs.
So, if we hate our banks so much, why are they still our banks? For some people, it’s probably just inertia: It takes time and effort to choose and switch to a new financial home base. And there’s the devil-you-know dynamic: Some cynical customers may figure that another bank could be just as bad, or worse.
Then there’s another, even more frustrating, reason: Consumer Reports recently looked at what it takes to move to a different financial institution and found that it’s not only very difficult, but deliberately so, especially if you use a lot of automatic deposit and payment services. Consumers Union found that even basic details such as whether or not a customer can close an account via phone often aren’t readily available, and that customers often get conflicting answers. A customer also runs the risk of incurring insufficient funds fees or monthly maintenance fees while they’re drawing down the balance of their old account.
Ernst & Young also found that a growing number of people are now banking at more than one institution. The number of customers with only one bank fell 10 percentage points, while those with three or more banks climbed by 11 percentage points. In the U.S., the number of people with three or more banks has doubled since last year.
This is the opposite of what banks want. The more we bank with them, the more money they make. Chase executives even said that some 70% of customers with less than $100,000 in business with the bank would become unprofitable after rules regulating fees kicked in.
Now banks are trying actively to get customers to use multiple products or services, sometimes by offering to waive monthly fees for checking account customers who also have credit cards, loans or investments with them. But this might prove to be a challenge for them, as more of us seem to prefer shopping around for banking products on an a la carte basis.