Institutional Risk Analytics, the firm that donated the search tool for the Huffington Post's Move Your Money campaign, weighed in on the debate over its chances for success.
In a posting on the HuffPo's blog early Wednesday, IRA CEO and managing director Dennis Santiago said shifting money out of big banks and into community banks will make a "structural difference to the country's financial system."
His argument is that the checking and savings accounts of consumers and businesses, which count as core deposits, have a bigger impact on the financial health of community banks than they do on big banks with more diverse sources of funding.
"For each lending dollar of a bank, increasing the fraction of support for that lending dollar by core deposits (versus other forms of money) means greater confidence and stability for that bank," Santiago wrote. "The effect is less pronounced in institutions that have large fractions of their business model involved in investments that yield income from non-lending uses of funds."
He continued, "This means it's the community institutions focused on purer 'classic' banking operating models that get the most bang from your buck ... literally. So if the public shifts a small fraction of the nation's core deposit base into these institutions it magnifies the stabilizing effect on this portion of the financial system. That's provided the receiving bank is already in good shape, of course, and isn't saddled with other problems."
That's a reasonable argument, assuming that enough consumers and businesses are sufficiently motivated to take their money out of big banks, and that they don't disperse it among too many different community banks to have an impact on the core deposits of any individual institution.
Santiago said 115,000 people used the tool to search for a community bank in their zip code during the first 48 hours, and readers continue to use the tool around 45,000 times a day. He said users have searched for banking alternatives in 16,631 zip codes, or about 40% of the 42,000 zip codes assigned in the U.S.
The big question is how many users will act on the information they get. As Stuart Gunn points out in a earlier BankThink post, consumer inertia is a powerful force. And some people who might be inclined to switch to community banks just aren't willing to give up the convenience of banking with larger institutions. One reader of Santiago's blog post wrote, "Great idea, would switch too if the nearest community bank wouldn't be 10 miles away."