WASHINGTON-Bank stupidity. It is the gift that keeps on giving.

That is the message from Fred Becker, president and CEO of NAFCU, when asked why a recent survey by the trade group found credit unions continue to experience substantial membership growth. He said banks are driving away consumers by raising fees and charging for services that formerly were free.

"We are going to play bank fee Whack-a-Mole for quite a while," he told Credit Union Journal. "Banks are going to continue to raise their fees or manipulate things."

Becker recalled the words of Tim Pawlenty, former governor of Minnesota, who when he was applying to be the head of the Financial Services Roundtable said what banks need to do is "stop doing stupid things."

"As banks do stupid things it creates opportunity for credit unions," Becker assessed. "It takes inertia for people to move their accounts. It is an itch, and as that itch gets infected people lose patience and eventually scratch, as in move their accounts."

Becker noted NAFCU's credit union locator website, CULookup.com, saw a 176% increase in traffic because of Bank Transfer Day.

 

Survey Says

The survey results, which were reported in NAFCU's October Economic & CU Monitor, found:

* Nearly 56% of credit unions responding said membership growth in the past year has exceeded expectations.

* More than half of survey participants (55.6%) confirmed that the relationships with new members gained from Bank Transfer Day have strengthened. The most common impact among respondents has been an increase in accounts (60%), followed by real estate loans (33.3%), credit card loans (26.7%), auto loans (20%) and CDs (6.7%).

* The most common reason cited by new members for switching from a bank to a credit union is dissatisfaction with banks (46.7%), followed by superior credit union loan and deposit rates (30%), increase in bank fees (16.7%) and poor customer service at banks (10%).

According to Becker, another factor in their growth is the fact CUs are "coming of age."

"People are recognizing credit unions have shared branching and participate in ATM networks, which give people access to more ATMs than B of A. They have the same products and services as banks."

Becker said another quote recently caught his ear. On Sept. 21, at the Exchequer Club here, Thomas Hoenig, director of the FDIC, said, "It is alarming that CEOs of some financial institutions fail to grasp why they are trusted so little."

"People are looking for true value today, and that true value is the credit union industry," Becker declared. "Credit unions could not be situated better than they are, because consumers are very frustrated with banks."

Asked if CUs are doing enough to convert these frustrated consumers into active new members who have checking accounts and loans, Becker said he believes they are.

"We keep encouraging credit unions to take advantage of the opportunity when they get people in the doors. Credit unions need to continue to work it hard and follow up. People may not be looking for a loan today due to the economy, but credit unions need to ask, 'What else can we do to help you?'"

 

Lesson Learned

The lesson from BTD, Becker noted, is in today's wired society, when people have a complaint, they take it to social media.

"That is how Kristen Christian started Bank Transfer Day-she sent a message on Facebook. Credit unions have to be very aware of viral media and be willing to take the opportunity when people tweet about banks messing up.

"The bottom line is credit unions have a good business model and it is a long-standing business model that has held up over time and continues to build," he added.

 

 

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