SCOTTSDALE, Ariz.–A leading theory for why more bank customers aren’t moving to other institutions is being challenged by one analyst.
Ron Shevlin, managing director of fintech research at Cornerstone Advisors and author of the book Smarter Bank and the Snarketing blog, pointed to JD Power's
2019 U.S. Retail Banking Satisfaction Study, which found just 4% of consumers switched primary banks in 2018 and said he disagrees with the interpretation by some that “Customers are staying put because banks, particularly large ones, have made banking so convenient that account holders are shrugging off any concerns they may have."
Shevlin’s argument: “Deposit displacement is diminishing the importance of the checking account.”
“Checking accounts have become ‘paycheck motels’—temporary places for people's money to stay before it moves on to bigger and better places,” wrote Shevlin. “The cause of this is deposit displacement: the displacement, or diversion, of funds from traditional accounts (i.e., checking) to alternative accounts.”
Examples of deposit displacement include health savings accounts (which hold $44 billion), P2P payments apps, merchant apps, robo-advisor tools, other savings tools from fintechs, and digital banks, he said.
Don’t Forget Amazon
Shevlin also reminded that Amazon cannot be forgotten, with studies showing roughly 40% of 30-something Millennials and Gen Xers would open a fee-based Amazon checking account bundled with services like cell phone damage protection and ID theft protection for a $5 to $10 monthly fee.
“What's important to note there is that three-quarters of all consumers who expressed an intention to open an Amazon checking account said they would keep their existing checking accounts open,” wrote Shevlin. “Consumers don’t close out accounts, they just open new ones. Bank switching is on the decline because money movement is so easy, not because large banks have made banking convenient.”
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