Big banks have had an image problem since the financial crisis. Americans overwhelmingly blame them for the mess, and some still feel strongly enough that they have pangs of guilt even thinking of doing business with the largest financial firms.
It’s not hard to understand why. Books like Michael Lewis’ best-selling The Big Short make clear how giant institutions blew it for many of their customers and fed the meltdown. When the banks themselves got into trouble, they received a taxpayer bailout. This is all well trodden territory. Still, it’s notable that negative consumer sentiment remains so strong.
Six years later, 78% of Americans say big banks are to blame for the recession and 66% remain angry about it, according to a consumer banking insights study sponsored by a coalition of community banks and credit unions. In the survey, half say it is important to bank locally and a quarter say they sometimes feel guilty bringing their business to a big bank.
Yet some of this anger and dissatisfaction may be misplaced—and it appears that big banks are beginning to get that message across. Customer satisfaction with banks in general is rising, according to the 2013 Banking Satisfaction Study from J.D. Power. The company’s bank satisfaction index rose 10 points to 763 on a 1,000-point scale. Smaller banks still score higher in areas that include fees and problem resolution. But the biggest gains were among the largest banks. They are closing the gap by making fees more understandable and by better explaining their services.
If you have ever traveled overseas, you already know the value of an account with, say Citibank, which has no-fee ATMs in more than 40 countries. Bank of America, through its Global ATM Alliance, offers no-fee ATMs throughout Europe and other regions. These giant banks and others like Wells Fargo and J.P. Morgan Chase also have tens of thousands of ATMs in the U.S., a convenient feature that community banks can’t match.
On the other hand, local banks tend to have sharply lower checking fees, more personalized service and significantly more lending flexibility. For a small business loan or many types of mortgages smaller institutions may be the way to go. Community banks and credit unions also tend to keep their assets in the neighborhood, which has a certain appeal. Among those who say it is important to bank locally, more than half cite the benefit to the local economy, according to the banking insights study.
There is no question that big banks played a major role in the financial crisis. As long as Americans continue to feel the sting of that downturn the big banks will feel the ire of some consumers. A third of those who favor small banks do so simply to register their discontent with big banks, having nothing to do with products or services. It’s just a protest.
Well, okay. But they might be better off softening that stand. For one thing, six years after the meltdown consumers would do well to consider their own role in the mess—no emergency fund, too much credit card debt, too little attention to the financial contracts they signed. There’s plenty blame to go around. Today, many big banks (and some smaller ones) offer tools and programs to help educate consumers and raise the public’s financial I.Q.
Certainly, small banks have many advantages. There are ample reasons to use them apart from any desire to penalize big banks. My mortgage is through a small bank and I could not be more pleased. But big banks will always be there first with cutting edge technology, as was the case with remote check deposit and mobile banking. And if you ever find yourself in Buenos Aires without enough pesos, as I recently did, you’ll be thankful for that Citibank ATM around the corner offering unfettered no-fee access to your cash, in blessed English.