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The industry needs to find its way to a future in which the president isn't complaining and the Wall Street occupiers go home and disenchanted customers are content.
November 2
Community banks and credit unions plan to keep pushing promotions in coming weeks as a way of maintaining momentum after Bank Transfer Day.
A number of community banks have gone so far as to build marketing campaigns around now-scuttled plans by Bank of America Corp. and other big banks to implement monthly debit card fees.
Scores of small banks are touting free checking, with some offering cash to those who switch banks. Many bankers say they still have an opportunity to attract upset customers, even though most big banks have scrapped plans for new debit fees.
"I don't think you can put the genie back in the bottle," said Gregory Mitchell, the president and chief executive of First PacTrust Bancorp Inc. in Chula Vista, Calif. "There's already been a high degree of dissatisfaction with customers. … It just became the proverbial straw that broke the camel's back."
First PacTrust's bank, Pacific Trust Bank, launched an aggressive guerilla marketing campaign last week. It used Saturday's so-called Bank Transfer Day to start offering a $60 annual cash rebate to certain customers who use debit cards. (The amount equals $5 a month as a tip of the hat to B of A's now-abandoned fee.)
Management had planned nine months ago to launch a $50,000 marketing campaign in the fourth quarter to rebrand Pacific Trust as a community bank instead of a thrift. Management said B of A's gaffe came at the right time.
"With B of A pulling back, that helps us even more because there's just a lot of noise that keeps our offer relevant in consumers' minds," said Gaylin Anderson, the bank's chief retail banking officer.
Industry observers agreed that big banks did themselves a disservice by proposing the fees. Such a credibility hit will linger even though the fees went away.
"There appears to be reputational damage that is ongoing no matter what the larger banks do," R. Scott Siefers, an analyst at Sandler O'Neill & Partners LP, said during an Oct. 31 American Banker analyst roundtable.
Bank Transfer Day was a grassroots consumer initiative that credit unions seized on as a way of standing out from the banking industry, but some banks are also attempting to capitalize.
"The momentum seems to be going mostly to credit unions but I think a lot of community banks are seeing a lot opportunities as well," said John Hirabayashi, the president and CEO of Community First Credit Union of Florida, which is in Jacksonville.
Community First had scheduled a new advertising campaign this week with a focus on free checking. Hirabayashi said that he had no interest in participating in Bank Transfer Day or "jumping on the bandwagon, so to speak."
Even before the credit union's campaign, memberships rose 50% and checking accounts increased 70% in October compared to a year earlier. Hirabayashi said a survey of new members found that more than half came from B of A or Wells Fargo & Co.
Though Hirabayashi believes the largest opportunity has passed now that B of A has scrapped its debit fee, he said the bank will still have to find another way to make up for Durbin costs, likely creating more opportunities for small banks and credit unions.
"I don't think we've heard the end of this thing yet," Hirabayashi said. B of A "is not going to leave that kind of money on the table."
Even banking companies that must comply with the Dodd-Frank Act's Durbin Amendment, which caps interchange fees for certain institutions, have been playing off of their larger competitors.
FirstBank Holding Co. in Denver has been on an aggressive free checking campaign in recent months. The $11.4 billion-asset company was the only one among Denver's ten biggest banks to still offer free checking despite having to comply with the regulation, said Dave Baker, FirstBank's president.
Even with the larger banks retracting planned fees, Baker said the campaign is still relevant. "Our decision to keep [the campaign] is to give us a different offering in the market in order to contrast us," he said.
The company is using advertising in Denver to encourage consumers to text their bank's name to FirstBank. Those who do will get a text back detailing what the rival bank is charging for checking accounts. The campaign is running for the rest of the year.
There are still caveats to all the deposit deals, since banks must spend cautiously amid intense pressure on net interest margins.
Pacific Trust Bank is paying $60 only on money market and checking accounts that require a higher minimum balance, not to free checking accounts. FirstBank has always had an annual debit card fee, which was raised to $10, from $7.50, following Durbin.
"In terms of the adverse impact, there's no way anybody can make up fully" for Durbin, Baker said. "It's important to attract consumers into our banks" because "if we don't increase our market share then we failed" at the strategy.
Pacific Trust believes it has an upper hand because it is part of a credit union cooperative where its depositors can access accounts through any credit union or automated teller machine in the network.
First PacTrust, meanwhile, has seen some traction. In recent weeks it averaged roughly a dozen new accounts daily. Anderson said the bank had 52 openings on Wednesday, the first day it began advertising its $60 offer.
Pacific Trust ran a truck through its Southern California markets last weekend, and certain branches had outdoor barbecues on Saturday to augment later operating hours that day.
