Sunday, March 4, 2012

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, 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?


  1. With all the bad press big banks have received, it is interesting to read a blog with a different perspective. BoA has an opportunity to make this a positive. One way of doing this is by showing the public what they do to support the communities they serve. If they spent advertising time & money promoting the Non-Profits they support, it could be a win win situation for them and the charities they support.

  2. Hmm. Maybe ALL banks should change their charters and become credit unions. That would solve a LOT of problems, no?

  3. I think the sensationalism of credit unions is only increased by the bad management decisions of big banks of the past. Media will always put a spotlight on any attempt the big banks make to "right their ship" through increased fees to their customer base, regardless of its purpose. I agree with the earlier comment that BofA must highlight their efforts to help build the communities they serve. Research shows that consumers will choose to support a brand based on its philanthropic efforts if all other things are equal.

  4. I think the point some commenters missed in all of this is the growth numbers. Instead of getting beat up about not producing the "soaring growth" the rest of the industry is supposedly seeing, CU marketers need to realize that the Bank Transfer Day phenomena was fun, but the results have yet to translate into real, sustained growth for the majority of CUs. One new account per day per CU is not "soaring" growth. Real growth comes from offering real solutions to real problems in a convenient, affordable way...not beating up on a competitor who is trying to figure out a way to get paid for offering a service. That's like beating up on Apple for charging three times as much for their laptop as HP. Apple figured out a way to charge more for a user experience different from a Windows computer. BofA is trying to find a way to charge more for a user experience different from a credit union. So far -- congressional, media and public criticism aside -- B of A and the rest of the mega banks are still winning the user experience battle...and are still growing.