I'm home for Thanksgiving, which means I'm reading about my Patriots big win yesterday in The Boston Globe. The paper also has coverage of another of my interests: consumer finance. Working off a Zogby survey -- I'm a bit skeptical of online surveys, but there you go -- the paper reports that more people are moving to local community banks and credit unions:
Last Thursday, Koplik closed his two longstanding Bank of America accounts, moving $35,000 to Cambridge Savings Bank, where he will earn a higher interest and pay fewer fees.“That’s a customer of 33 years they’re losing,’’ he said of Bank of America. “But enough is enough.’’
The bank is among the nation’s larger financial institutions watching dissatisfied customers slip away, lured in by smaller community banks and credit unions offering deals and incentives. A recent poll by the opinion research firm Zogby International found 14 percent of US adults have switched to a community bank or credit union in the last year, with 60 percent of that group saying that they moved their accounts to “protest policies or behavior of large national banks.’’ Lower service charges and better rates of return ranked second and third.
I recently left behind Bank of America for similar reasons, so I can sympathize. However, these changes remain on the margins, and the vast majority of American deposits remain concentrated in the largest banks, though compared to almost every other developed country, we have a very diversified banking system. Last year, Arianna Huffington started Move Your Money, a campaign to encourage consumers to proactively shrink the banks, but after an initial bout of publicity, hasn't really followed up on it.
Even when people see the incentives and want to shift their deposits, it's difficult. The most telling finding in the Zogby survey is that "26 percent said they have considered taking their banking elsewhere, despite the headaches involved in moving accounts." Moving your money is a hassle, and understanding the different offers from banks is a challenge thanks to fine print and time-sensitive offers.
Currently, we have a consumer financial system that is so hard for participants to understand that competition is rendered meaningless. There's little incentive for banks to offer a better deal if people can't understand it or it is simply to hard for them to take advantage of it. That's the point of Consumer Financial Protection Bureau: to make the market work again, so that competition is channeled toward better prices for consumers.
-- Tim Fernholz
