Ever increasing big bank fees are driving millennials to go local with their money, according to new data compiled by Accenture Plc.
Over the last year community banks have netted a five percent increase in account holders among the 18 to 34 demographic, while credit unions recorded a three percent gain. By comparison, large national and regional banks lost 16 percent of millennial customers.
The main reasons cited is that bigger banks charge more for retail services and have increased fees for overdrafts, account maintenance, and ATM withdrawals. While local banks and credit unions don’t usually have many ATM facilities each, they usually combine to offer ATM networks and also reimburse ATM fees their customers may have to pay when out of the network.
More millennials are also using e-banks.
MoneyRates.com’s recently released semi-annual survey, finds big-bank fees average out at $15.15 compared with $11.51 at smaller competitors. Large banks also are the least likely to offer free checking, with only 17 percent offering the option, compared to 31 percent of smaller banks which have the service. MoneyRates defines a large bank as one that has a minimum of $10 billion in deposits.
MoneyRates’ senior financial analyst Richard Barrington says, “Traditionally, big banks have been able to dominate with physical presence, having extensive branch networks, name recognition and being able to spend a lot on advertising. But the popularity of banking via the Internet has leveled the playing field.”
Millennials are more likely to change their primary banks, which Barrington says is “at a pace nearly double the average of other age groups.”
Since January 26, 2015, 18 percent of millennials have found a new financial provider, and a massive 81 percent say they review online bank fees and reviews of customer service before making a decision.
The president and chief executive officer of Independent Community Bankers of America, Cam Fine, says, “Millennials in particular crave more high-touch. They want to make sure people are “paying attention to their needs.”
He says of all generations, millennials are most interested in learning more about their finances and likely to seek out financial advice.
Karin Bonding, a recently retired finance professor from the University of Virginia's McIntire School of Commerce says smaller localised banks and credit unions are prepared to swallow the costs of offering services such as free checking in exchange for the long-term gains that come with serving the younger generation’s future investing, mortgage and retirement needs.
Judy Hicks, a vice president and consumer loan manager at Baker Boyer National Bank in Walla Walla, Washington, says, “We have to stay competitive with products and services. We want to bank that younger generation, because they’re going to get there someday.”
She says banks that win the loyalty and trust of the millennials now could keep it.
“If you have good customer service, the customer will stay with you. ” says Hicks.