Bank of America Should Become a Credit Union

I have decided that the best course of action for Bank of America may be to become a credit union. Despite the regulatory hurdles and government scrutiny that the bank would need to deal with, it may be an easier course of action than trying to catch a break with our industry's trade press, the general media and definitely those using social media to respond to every move the bank makes.

For instance, American Banker published a story last week from Ed Roberts entitled, Bank Transfer Day Spurs Big Membership Growth at CUs. The story cited that the credit union industry had near record growth in the second half of 2011 . . . 'after the ill-fated September announcement by Bank of America of monthly debit fees prompted Bank Transfer Day'. This growth of 850,000 members in the final six months of the year contributed to an annual growth for the credit union industry of almost 1.3 million new accounts, reported the NCUA.

According to my calculations, a growth of 850,000 new members for the second half of 2011 represents an average of fewer than one incremental new account per credit union (not per branch) a day. The statistics are roughly the same when you look at the annual growth rate as well. Assuming that the number of new members represented incremental growth, the 1.3 million new members reflect only a 1.4% growth over 2010 according to the 2010 Government Census. 

How does this become newsworthy? In almost all U.S. major newspapers, a version of this article ran including a reference to both Bank Transfer Day and Bank of America. The Los Angeles Times ran a headline, Banks' Fees Pay Off - For Credit Unions while Forbes ran an even more sensationalized headline, Credit Unions Membership Soars as Customers Spurn Big Banks. Does any other industry get as much press for close to flat line growth? Shouldn't this be more realistically considered business as usual? 

And how confused is the general consumer? Just a few short weeks before these reports, many of the same industry and national news organizations covered the Javelin Strategy and Research study that Bank Transfer Day had just a minor impact on money movement despite all of the media coverage. The Financial Brand covered the conflicting numbers being presented, and even the New York Times ran an article entitled, The Exaggerated Impact of Bank Transfer Day.

For news organizations (including the American Banker) to accept what amounts to unfiltered PR releases without determining if it is really 'news' is detrimental to both the banking and credit union industry, and feeds the 'banks are bad' sharks that continue to circle the consumerism waters. Maybe there should be an article this coming week announcing that each of the top 7 banks (and maybe the top 10) opened more than 1 million accounts in 2011 while being beat up in the media daily. To me, that is far more newsworthy than taking a PR feed from the credit union industry and not doing simple math to determine if generating 400,000 accounts in a quarter or 1.3 million last year even moved the needle.

On top of the aforementioned wide distribution of positive credit union PR by major news organizations mentioning Bank of America in a negative light, BofA received additional negative press last Thursday when the Wall Street Journal ran a front page article entitled, Big Bank Weighs Fee Revamp around the potential of the nation's second largest bank expanding a current checking pricing test that began last Fall. As has become commonplace, virtually all major news organizations ran their own version of the same 'old news'. And if that wasn't enough, a Massachusetts official slammed B of A for testing fees that would "burden" many of its customers. 

Unlike the American Banker article around credit union growth done by one of her associates, Maria Aspan did a very admirable job of covering the double edged sword facing Bank of America in her article entitled, B of A Draws New Fire For Old Checking Fee Test. Her reporting (and many of the comments associated with the article) underscored how Bank of America is in a no-win situation, where transparency is required but very painful.

So, instead of Bank of America trying to defend itself against an ongoing barrage of negative press and negative positioning as the reason for the 'growth' of the entire credit union industry, why doesn't BofA change their charter to become a credit union? Like a local credit union, BofA already does a massive level of community giving through their national and local philanthropy (over $200 million in 2010). They also offer loans and services on a local level, investing in the communities and small businesses they serve. The only thing they don't seem to get on the same level as credit unions is good press.

I don't have anything against the credit union industry or even the American Banker. I just wish that coverage of the industry (and of Bank of America) would be less sensationalized and biased and that the financial witch hunt would end. It definitely isn't good for Bank of America and I don't think it is very good for either the banking or credit union industries.

What do you think?

Did Social Media Cause Big Bank About-Face?

A month after Bank of America and other large banks announced the levying of a monthly debit fee for debit card use, virtually all of the big banks that were either testing or had implemented a debit fee have backed off of their plans amid a groundswell of negative publicity.

On Friday, Chase and Wells Fargo announced that their respective debit fee pilots would end, and today SunTrust and Regions Bank announced a change of fee policies with refunds for fees already charged customers. Over the past week, many of the other top banks in the country like U.S. Bank, PNC Bank and TD Bank made strong statements that they would not be implementing debit fees. And  in an surprise move (after the initial posting of this blog), Bank of America rescinded their planned $5 debit fee based on 'consumer concern'.

Was this unprecedented big bank about-face caused by the significant public response initiated through blogs and social media?

Almost immediately upon the announcement of the $5 fee by Bank of America, a grassroots movement began on Facebook under the name of 'Bank Transfer Day'. President Obama and Richard Durbin blasted Bank of America for their decision and trade publications like the Credit Union Times immediately jumped on the Bank Transfer Day bandwagon, sharing local and regional initiatives while encouraging member organizations to extend November 5 Saturday hours.

CUNA and the state credit union leagues also joined the effort by quickly creating marketing and advertising support for the social media fed Bank Transfer Day, including model press releases, Q&As as well as management and staff talking points. Even independent organizations like the Consumers Union provided a 'How to Change Your Bank' video and a 'Move Your Money Checklist' on their www.defendyourdollars.org website.

In its own defense, Bank of America tried to blame the recent Durbin Amendment for it's new fee which was not well received by consumers and only added fire to an already growing discontent across social channels. "Bank of America's new debit card fee was the last straw for many consumers who are tired of banks that got bailed out and are now turning around and hiking fees," said Norma Garcia, director of Consumers Union's financial service program.

Despite all of these efforts and initial reports of increases in new accounts at several large credit unions immediately after the Bank of America announcement, the actual transfer of new accounts to small banks and credit unions may be less than spectacular. As Jeffry Pilcher from The Financial Brand wrote last week on his blog entitled, "4 Ways 'Bank Transfer Day' is Silly", this effort may not create any more new accounts than previous movements like the Huffington Post "Move Your Money" effort. As he and other industry pundits have mentioned, inertia is difficult to change, especially since transferring bank relationships is so difficult for the consumer.

But while social media efforts may not result in massive movements of funds, the impact did result in the movement of something much more significant . . . the previously stated policies of some of the largest banks in the country.

As mentioned by Jesse Torres on his Social Media and Banking blog last Sunday regarding Bank Transfer Day and related efforts, "Such an attempt 10 years ago would not have resulted in such an outcome. However, with social media's immediate and widespread impact, banks must now consider the the Social Media Effect when devising corporate strategies." He goes on to say that Bank of America and the other large banks that instituted a debit fee failed to realize the impact of potential public outrage.

The public responses associated with the debit fee reversal by SunTrust and Regions Bank today illustrate the dramatic impact that social channels can have in establishing (or changing) corporate pricing and policy. "We believe banking is a relationship business and recognize the importance of responding to client preferences," stated Brad Dinsmore, consumer banking and private wealth management executive at SunTrust. "We've listened to our customer's feedback and will provide the convenience and security of check cards at no additional charge as part of our checking accounts."

Similarly, John Owens from Regions Bank stated, "We have heard from our customers and are responding to their feedback by eliminating the monthly fee."

Do you feel the impact of negative consumer reaction that was amplified by social media efforts like Bank Transfer Day resulted in the reversal of debit fee decisions? Will this mark the end of banks moving en masse as they have done in the past with regard to fees and policy? Will future fees be less transparent?

I would love to hear from you.