Archive for the ‘Banks – Credit Cards’ Category

Big banks face flight of unprofitable customers … good news for credit unions ???

November 7, 2011

Last Saturday was “Bank Transfer Day”.

First the details, then the analysis …

According to the AP:

A grassroots movement that sprang to life last month is urging bank customers to close their accounts in favor of credit unions.

The spirit behind “Bank Transfer Day” caught fire and had more than 79,000 supporters on its Facebook page.

“Consumers are waking up and seeing that they have options.”

Even with its public support, however, it’s not likely that any account closings that take place will make a big dent with industry titans such as Chase, which is the largest bank in the country with some 26.5 million checking accounts.

Credit unions and small community banks have been basking in the spotlight and issuing press releases highlighting what they say are superior interest rates and more intimate service.

Big banks have also learned that customer grumblings don’t always translate into action. That’s particularly true for those who have multiple accounts, direct deposit and automatic bill pay; many decide that switching just isn’t worth the hassle.

Here’s what I find bemusing …

Banks only make money on about 40% of their customers.  Think multiple accounts, big balances..

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My bet: the bulk of the  Bank Transferers are in the bottom 60% … especially since the debit card fee structures (from merchants) were cut by legislation and B of A’s evil $5 monthly fee was rescinded.

The WSJ says that people who gravitate to credit unions will likely  tend to be ones who were unprofitable for giant banks because of the small balances they keep on deposit, low number of products they buy and the relatively high account-maintenance expenses at big financial firms. —  it costs the giant banks about $350 to $450 per year to maintain a checking account

So, the credit unions and small banks are probably getting a bunch of accounts that will hurt their profitability.

Anybody remember the 1980 Mariel Boatlift?

Bank Transfer Day may be the big banks’ equivalent …

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About your FDIC insured bank accounts …

September 4, 2009

Another lesson that federal guarantees aren’t free:

WSJ, The Coming Deposit Insurance Bailout, Sept. 1, 2009

The Federal Deposit Insurance Corp. reported late last week that the fund that insures some $4.5 trillion in U.S. bank deposits fell to $10.4 billion at the end of June, as the list of failing banks continues to grow. The fund was $45.2 billion a year ago.

The FDIC has since had to buttress the fund with a $5.6 billion special levy on top of the regular fees that banks already pay for the federal guarantee. Everyone now assumes the FDIC will hit banks with yet another special insurance fee in anticipation of even more bank losses.

Earlier this year they quietly asked Congress to provide up to $500 billion in Treasury loans to repay depositors.

84 banks have already failed this year, and … the FDIC said it had 416 banks on its problem list at the end of June, up from 305 only three months earlier. The total assets of banks on the problem list was nearly $300 billion, and more of these assets are turning bad faster than banks can put aside reserves to account for them.

FDIC Chairman Sheila Bair continues to say that deposits will be covered up to the $250,000 per account insurance limit , and of course she’s right. But we wish she’d force Congress—and the American public—to face up to the reality of what deposit insurance costs. Amid the panic last year, Congress raised the deposit limit from $100,000 to $250,000.

The $250,000 limit was supposed to expire at the end of 2009, but in May Congress extended it through 2013, and no one who understands politics thinks it will return to $100,000. The rising bank losses mean that the FDIC’s ratio of funds to deposits is down to 0.22%, far below its obligation under the insurance statute to keep it between 1.15% and 1.50%.

Full article:
http://online.wsj.com/article/SB10001424052970204731804574385072164619640.html 

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When is a phone like a credit card ?

January 17, 2009

Excerpted from AdAge, “Banks Can Keep Customers, Make Money With Mobile” by Rita Chang, Jan 5, 2009
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Bankers who want to cut customer churn and make money should look no further than the mobile device in their pockets,.

Generally, banks have largely viewed the channel as a way to generate savings by diverting customer service away from call centers or interactive voice response. But at some point, they have to look beyond saving overhead and use mobile as a revenue generator.

A big piece of that will depend on the adoption of near-field communication (NFC) payments…What are NFC payments? It’s when a phone can be used to pay for a transaction because it has an on-board commerce chip that can talk with a receiving chip inside a point-of-sale device.

NFC is made for speedy, high-volume transactions…because all consumers have to do is tap their phone against a reader and input a password, which is quicker than using cash…Each time credit is used, the issuing bank gets a cut of the total transaction.

The market isn’t quite there in the U.S. yet, as the phones supporting these transactions are not available…Still, today banks should be looking at mobile as another channel that consumers can use to interact with it, in addition to the ATMs, phone and online — essentially deepening their relationships and averting defection…

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Full Article:
http://adage.com/digitalnext/article?article_id=133568
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