J.D. Power has a new report out on how people shop for a new bank, and some of the results are a little surprising, at least for me.
The study found that the biggest factor that attracted new customers to a bank was brand image, followed closely by advertising and having bank branches in convenient locations.
Pricing -- fees and interest rates -- carries relatively little weight in influencing customer purchase decisions, despite recent heavy media coverage of changes to fees for bank accounts and credit cards.
For personal finance writers, reading a study like this is a bit like swishing Scope around in your mouth or walking out the door on a really cold day: refreshing in a harsh kind of way.
Writers spend a lot of time talking about fees and interest rates, because they substantively affect personal finance outcomes. Surveys like this are a perfect way to remind us that, as with public policy, indie films and the NHL, only a fraction of the public really cares.
So if they don't care about fees, what do bank shoppers care about?
In the polling J.D. Power conducted for the report, an abundance of convenient branches was the No. 1 reason people gave for settling on a particular bank. But thanks to innovations like direct deposit and online banking, few people actually visit branches regularly, says Rockwell Clancy, vice president of financial services for J.D. Power. So why would having branches close by matter?
"In a business where the value is fairly intangible, branches are one of the most tangible elements," says Clancy. "They're a tangible branding device. They're there every day I drive by. They're a symbol of solidity in an industry where's there's not a lot of it, and so they take on this sort of outsized role."
I think Clancy's on to something here. When you put your money in a bank, in a way you're taking a leap of faith. You're taking tangible, real money, and giving it an institution that will simply convert it into ones and zeros in its computers until you withdraw it again. Psychologically, it makes sense that people would be more willing to do that if the bank in question had some kind of solid, physical presence nearby you could go if there was a problem.
Aside from branch convenience, the other big factor driving bank shoppers was a combination of advertising, promotions and brand image.
"We took those with the highest acquisition rates -- guys like Chase, PNC, Suntrust -- and then looked at what they were doing that was different from the rest of the pack, and promotional offers like gift cards were very pronounced," says Clancy.
So why would spending big bucks on Madison Avenue ad men and shiny but probably small-potatoes gift cards draw in the customers?
"Advertising, again, is something that's tangible," says Clancy.
But while low fees and high rates didn't seem to be a great way to attract new customers, high fees did seem to be an excellent way to drive existing customers away. A sizable portion, 17 percent, said high fees or low interest rates at their last bank caused them to switch. Another 13 percent dumped their bank over "unmet expectations," showing that more substantive criteria had an influence over whether a bank could keep a customer.
What do you think? How do you choose a bank? Are fees the key, or do branch convenience and branding play a bigger role?