It started simply enough. Bank of America announced, and later reversed, a decision to charge debit card users a $5 fee.
What it became was the best present BofA could give credit unions: Fed up consumers looking for a better alternative and about two months of steady, free publicity and media coverage. That $5 fee served as the rallying cry for Bank Transfer Day.
The brainchild of Kristen Christian, a 27-year-old Los Angeles art gallery owner, Bank Transfer Day was positioned as a way for consumers to show their discontent with big banks by moving their funds to credit unions or community banks on Saturday, Nov. 5.
A Facebook page for the event stated that “together we can ensure that these banking institutions will ALWAYS remember the 5th of November!! If the 99% removes our funds from the major banking institutions on or by this date, we will send a clear message and give the 1% a taste of the fear that we experience every day when we aren't able to pay for our rent, food, medication, utilities, student loans, etc.”
From there, speculation began as to what it really would mean for the credit union industry, debates about the types of consumers it would draw, whether systems could handle the influx of deposits, if it would do more harm than good and finally questioning everything from the name to why pick a Saturday as Bank Transfer Day.
“My belief is that credit unions need to continue to promote their value regardless of how big or small Bank Transfer Day ends up being,” said Bill Handel, vice president-research/development at Raddon Financial Group in Chicago. “The difference between the mega-banks and community-based financial institutions was significant even prior to the imposition of debit card fees, so the imposition of these fees was a means by which this difference could be driven home.”
Even though the debit fee was dropped and the ability to differentiate between CUs and large banks may lessen, fundamental differences do not go away, said Handel.
In the view of Dennis Dollar, the former NCUA chairman and principal partner of a Birmingham, Ala., consulting firm, the mega-banks realized “they they are vulnerable to a significant loss of some of their most profitable accounts to credit unions and community banks.”
The battle for checking accounts, said Dollar, “is the battle for desperately needed fee income, and it will be fought for the next several years.”
Over the next 18 months, CUs, he forecast, “will pick up a sizable number of checking accounts when the comparison shoppers, reading the publicity about Bank Transfer Day, begin to recognize the credit union checking advantage that many progressive credit unions are offering in an attempt to seize upon this growing dissatisfaction with the big bank over reach on fee increases.”
Checking accounts, he continued, are also the gateway to additional services from a member.
In a Filene Research Institute blog, “The Day After Bank Transfer Day,” consultant Robert Hall warned that assuming BTD is successful, CUs need to convert these new deposits into earning assets–loans. Proper preparation for BTD requires “cross selling success during the new account opening process in refinancing auto loans held by banks” as well as a switch into lower rate credit cards.
For Brent Dixon, youth adviser for Filene Research Institute and Crash Network founder, it has delivered what credit unions have long sought.
“Credit unions have forever been trying to come up with a national brand awareness campaign, but now you have Bank Transfer Day, which is fully from the people, not trade associations or even the credit union industry,” Dixon said. “It’s driven by real emotions, frustrations and needs. It’s a huge opportunity for credit unions, and I hope beyond the marketing, they really make it easy for consumers to act and move their money over.”
Credit unions across the country certainly made the most of the opportunity presented. Many took advantage of the rising consumer discontent to reinforce their commitment to free checking and no debit card fees while positioning themselves as the local, full-service convenient alternative to mega-banks. Some used humor to get consumers to “Ditch,” “Break-up” or even “Divorce” their banks and others focused on educating consumers about the credit union difference.
In the end, Bank Transfer Day and all the hype leading up to it offered a mixed bag of results, with pockets of credit unions across the country that experienced great gains.
Initially, CUNA reported that credit unions had a net increase of 650,000 members in October however those numbers proved to be off by about 400,000. Actually, about 214,000 consumers joined credit unions in the month leading up to Nov. 5. That follows 227,000 new members in September. The NCUA reported that, based on reports from federally insured credit unions, those financial institutions added 450,000 new members in the third quarter.
To keep it in perspective, in all of 2010, 600,000 people joined credit unions, according to data compiled by the NCUA.
Ron Shevlin, senior analyst for the Boston-based Aite Group, a research firm advising banks and CUs, summed it up like this: while CUs may have won the lottery as a result of the big banks’ giant misstep, any fallout may be short-lived.
“Credit unions certainly don’t have to feel guilty about earning this great big pile of money,” said Shevlin, “but they should realistically recognize the windfall came to them not for who they are, but who they aren’t. To me that’s kind of sad.”
For Tyler Disburg, senior vice president at Montana 1st Credit Union in Missoula, Mont., Bank Transfer Day represented a missed opportunity to deliver a unified national awareness message.
“I’m happy that the conversation is taking place in a very public way, but I tend to believe that it’s a missed opportunity for delivering a cohesive communication plan to capitalize on, sustain and literally be a tipping point or game changer for the industry,” said Disburg.
“What we need is a sound bite that in a succinct, meaningful way articulates the value we offer and resonates with the general population. ‘people helping people’ is not saying anything. Yet, Got Milk? does. We always have to have conversations to communicate the value, when we should have a message that is quick and easy for consumers to understand.”
The industry buzz suggests that credit unions do plan to carry the momentum and build on the newfound awareness as a banking alternative on into 2012. Just what that will look like, remains to be seen.