Monday, February 27, 2012

Study: More customers switching banks

Consumers are increasingly ditching their banks as a result of fees, poor service and unmet expectations, according to a new survey from J.D. Power and Associates.

The market research firm's 2012 U.S. Bank Customer Switching and Acquisition Study, released today, found 9.6 percent of customers surveyed said they switched banks during the last year. That's up from 8.7 percent in 2011 and 7.7 percent the year before.

On the heels of Bank Transfer Day - and continued backlash over bank fees - smaller banks and credit unions are benefiting from an increased exodus from larger banks, according to the study, which examined the bank shopping and selection process.

"When banks announce the implementation of new fees, public reaction can be quite volatile and result in customers voting with their feet," Michael Beird, director of J.D. Power's banking services practice, said.

Acquisition of new customers by smaller lenders increased to 10.3 percent from 8.1 percent last year. The study found fees are the main reason customers shop for a new bank, with a third of customers of big banks and regional lenders citing fees as the main trigger for shopping around.

Among larger lenders, switching rates range from 10 percent to 11.3 percent, compared to a 0.9 percent defection rate for small banks and credit unions. That was down significantly from the 8.8 percent rate for those small lenders in 2011.

Customers are weighing more than just fees, J.D. Power found. Customer service is also a major factor, and new fees can act as the "straws that break the camel's back" when customers are already unimpressed by their bank's service experiences, Beird said.

As banks look to capture new customers, promotions and cash incentives are powerful tools, the study found. But just 32 percent of customers who selected a new bank because of promotions said they definitely would not switch banks again in the next year. By comparison, about half of customers who chose a new bank because of good service or positive recommendations said they definitely would not leave in the next year.

The 2012 study is based on a survey of more than 5,000 customers who shopped for a new bank account or primary lender in the past year. It was conducted in November and December and includes Charlotte-based Bank of America Corp., Wells Fargo & Co. and other lenders with a presence in the Carolinas. J.D. Power did not release switch rates specific to those banks.