Change In Life, Not Fees Is Reason Consumers Are Fleeing Banks For CUs

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WESTLAKE VILLAGE, Calif.-Credit unions that believe high fees are the primary reason they have seen an influx of former bank customers becoming new members are wrong, according to a new study.

Instead, the primary reason is a "change in life circumstances," according to the J.D. Power and Associates 2011 U.S. Retail Bank New Account Study, which found that approximately 8.7% of bank customers surveyed in 2011 said they switched their primary banking institution during the past year to a new provider. That figure is up from the 7.7% who said they did so in 2010.

The 2011 survey found that consumers said they had investigated an average of 1.9 financial institutions while shopping around for another provider, which was up from the average of 1.6 average banks in 2010, said the report.

Rocky Clancy, VP-financial services practice at J.D. Power, said a "change in life circumstances" was the most oft-cited reason cited by consumers for making a switch, followed by fees and rates, unmet expectations and poor service.

In settling on a new provider consumers said the most important factors were advertising, branch convenience, products and services, promotional offers, and direct and indirect customer experience, including past personal interactions, recommendations and the institution's reputation.

Interestingly, Clancy said that account and service pricing, including interest rates, actually carries little weight in driving consumer decisions.

However, said Clancy, pricing-fees and interest rates-carries relatively little weight in influencing customer purchase decisions, despite media coverage of changes to fees for bank accounts and credit cards.

Banks that performed well in acquiring new customers were more aggressive in their advertising and promotions, said the report.

Among J.D. Power's other findings in the New Account Study:

• 43% of customers who purchased an additional banking product made that purchase at their PFI. For those who turned to another institution for an additional product, promotional offers such as gift cards carried the most weight in influencing the purchasing decision.

• The primary factor in creating stickiness with a PFI is positive past experience and perceptions that their institution is more focused on customers than on profits.

The survey was based on input from 4,791 consumers who had shopped for a new banking account or PFI over the preceding 12 months.

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