WESTLAKE VILLAGE, Calif. (3/2/11)--Credit unions are seeing more members switching their business from banks, but they may be interested in why bank customers take the plunge to another institution. According to a new study of customers' shopping and selection process for banks, the most common reason isn't high fees--it's a change in life circumstances. Roughly 8.7% of bank customers surveyed in 2011 said they switched their primary banking institution during the past year to a new provider, according to the J.D. Power and Associates 2011 U.S. Retail Bank New Account Study, which was released Tuesday. That's up from the 7.7% who said they did so in 2010. This year, customers indicated they checked out 1.9 financial institutions while shopping around for another one--up from the average of 1.6 average banks in 2010, said the report. The most common reason for switching banks is a change in life circumstances, said Rockwell Clancy, vice president of the financial services practice at J.D. Power and Associates. Other popular reasons for switching included fees and rates, unmet expectations and poor service. Consumers who evaluated and ultimately selected a new financial institution indicated that the most important factors in their decision are advertising, branch convenience, products and services, promotional offers, and direct and indirect customer experience, including past personal interactions, recommendations and the institution's reputation. 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. "It's undeniable that the 'blunt instruments' of ad spend, branch density and promotional offers such as gift cards have been effective during the past year in capturing market share," said Clancy. "The question is whether these provide sustainable competitive advantage, particularly when compared with customer acquisition gains resulting from positive past experiences with a brand and Other findings:
* Less than half (43%) of customers who purchased an additional banking product made that purchase at their primary financial institution. 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. * Those who stay with their primary financial institution are most driven by positive past experience and perceptions that their institution is more focused on customers than on profits.
"Clearly, banks that are not providing a noticeably better experience are more likely to lose he business of indifferent customers who are more easily lured by the next attractive promotional offer to come along," said Clancy. The survey is based on multiple evaluations from 4,791 customers who shopped for a new banking account or new primary financial institution during the past 12 months. No credit unions were among the institutions in the study.