Credit Unions are reaping the benefits of the effect the Durbin Amendment has on banks debit card portfolio strategies, with a number of them launching initiatives to attract more debit card customers. Credit unions represent just 4% of the overall US cards market so there is room for growth, writes Duygu Tavan
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The timing was certainly not great to start charging for services and products that customers have gotten used to. But banks did follow it through, arguing that they will have to make up for the lost revenue due to the effects of the Durbin Amendment. And so Bank of America (BofA), Wells Fargo, Citi, US Bank, Sun Trust angered customers. And so credit unions began reaping the benefits of the banks misery. Even now, after these banks have made a U-turn and decided to drop the fees, credit unions are on the rise – in little over a month, they registered 650,000 new members.
According to the Credit Union National Association (CUNA), the network of affiliated state credit unions, hundreds of thousands of consumers have rushed to credit unions since the end of September.
The angered masses of consumers have brought along their savings, boosting credit unions deposit balances. A nationwide survey by the CUNA of 5,000 of the 7,400 state and federally-chartered credit unions revealed that more than 80% have registered a growth in their customer base, which they attribute to the growing anger and mistrust of consumers towards large banks.
Another reason for the big migration, the CUNA highlighted, was the social-media inspired Bank Transfer Day, which aimed to urge consumers to switch their current accounts by 5 November. The CUNA estimates that at least 650,000 consumers have joined credit unions since 29 September the day Bank of America announced that it would introduce a $5 monthly debit card fee. All this, the CUNA, says has boosted credit unions balance of savings accounts by $4.5bn.
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Not a surprise
This does not come as much of a surprise: A poll by Bankrate.com in March found that 64% of US bank customers would consider switching to a credit union if account fees were really to be raised or introduced.
According to the president and CEO of CUNA, Bill Cheney, the results are proof that consumers are clearly making a smarter choice by moving to credit unions where, on average, they will save about $70 a year in fewer or no fees, lower rates on loans and higher return on savings.
The study by CUNA found that the larger credit unions, which account for about a fifth of all credit unions in the US (with total assets of or above $100m), registered the biggest growth. Despite making up just 20% of all credit unions in the US, these large unions represent 80% of the overall credit union member base and more than 70% of them have grown their membership base since the end of September.
The mass migration from banks to credit unions did not come from nowhere, of course. Credit unions have initiated promotions and other advertising campaigns to attract customers. The campaigns included sending out what CUNA described as "switch kits". Some even offered bonuses for members who brought in new members. Then there were web and social media initiatives, extended opening hours and more staff for 5 November, banners in branches.
The message was simple. They are doing whatever their resources will allow them to do to help serve this consumer surge in interest in credit unions, Cheney said at the announcement of the CUNA survey results.
On Bank Transfer Day alone, credit unions registered 40,000 new members, received $80m in new savings account funds and issued new loans worth $90m on 5 November.
According to Cheney, the surge of 650,000 new credit union members since the end of September was more than the total for the twelve months in 2010.
Shortly after Bank Transfer Day, Cheney said:
Mass migration
"Since 29 September the day BofA announced its now-rescinded monthly $5 debit card fee average estimated membership increases nationally were around 20,000 new members each day. On 5 November, consumers doubled the pace. It’s clear that consumers kept up their interest in credit unions."
"Consumers should be given more credit for being smart about what to do with their money. Obviously, many did not wait for a specific day, but took the time to make the change to a credit union in a deliberate manner. Consumers made a smarter choice."
This nation needs more economic activity to get back on its feet; credit unions are ready and willing to help gets things moving. Perhaps credit unions and their new members got things started on 5 November.
