New study reveals top crises that would cause U.S. consumers to end banking relationships, with 56% citing compliance violation issued by government/FDIC
ATLANTA, Oct. 13, 2020 – York Public Relations, the nation’s only crisis PR firm dedicated exclusively to mitigating crises for financial institutions and fintechs, today revealed that over half of U.S. consumers (56%) would end a relationship with a bank or credit union if the institution was cited by a government regulatory agency for non-compliance. The survey was conducted online by The Harris Poll on behalf of York Public Relations, garnering responses from 2,053 U.S. adults age 18 and older.
The survey also found that younger consumers tend to be less likely to be concerned about that type of violation than older generations. According to the findings, 47% of U.S. consumers between ages 18-34 and 46% between the ages of 35-44 would leave their institution after a government/FDIC violation, compared to 70% of those over 65. Even those between ages 45-55 and 55-64 are more likely to be concerned than younger adults, with 60% and 62% respectively indicating they would end a banking relationship.
Since 2008, regulators have imposed more than $253 billion in fines, creating severe strain for many institutions. In the 15-month period through 2019, regulators fined banks a record $10 billion from anti-money laundering violations alone, according to a report from Fenergo, a European startup that makes software to help financial institutions detect illegal transactions. Compare this to the total of $26 billion from 2008 to 2018 – an entire decade. Fenergo expects these numbers to be higher for 2020.
In extreme cases, regulators will shut down financial institutions completely. During the Great Recession, this was the fate of more than 500 banks and 100 credit unions. Since 2010, 213 banks have closed, however, most were through acquisitions. For credit unions, 113 have closed or merged over the last ten years.
In addition to 56% of U.S. consumers citing they would end a banking relationship following non-compliance citations from regulators, banks and credit unions also risk losing accountholders following a merger, regardless of it being a “business as usual” acquisition or sold with government assistance.
According to a Gallup poll, bank customers leave at a much higher rate following an acquisition at 8% compared to other non-banking organizations at 5%. However, that rate is higher (10%) if the acquiring bank has lower customer engagement – twice the industry average. If the acquiring bank has higher engagement, the rate falls closer to the overall industry average at 6%.
Regardless, a 6% drop in customers or members following a merger means fewer deposits. Add to this a potential 56% loss due to regulatory citations that may have prompted the merger, institutions can find themselves facing a serious crisis.
“Regulatory memos, citations and fines can be extraordinarily damaging for financial institutions, as we’ve seen in years past. Not only can they create financial challenges, but the reputational damage can often be far worse – and it can go beyond the bank itself,” said Mary York, CEO of York Public Relations. “Boards of Directors should be personally concerned with such a crisis. As members of the community, many are also business owners. How will this impact their other relationships?”
York added, “It is crucial that banks and credit unions prepare for worst case scenarios if this happens. What should they communicate to customers and members – and how? How will they handle calls from local news stations asking questions or from employees? What is their plan moving forward to correct any infractions? These questions must be answered and a plan needs to exist. Otherwise, financial institutions risk losing both their reputation and their accountholders.”
About York Public Relations
York Public Relations is the nation’s only crisis public relations firm dedicated exclusively to financial institutions and fintechs. The firm serves clients ranging from community banks, credit unions and mortgage lenders, early- and late-stage fintech startups, and public and privately-held financial technology companies. For more information, please visit www.yorkpublicrelations.com.
This survey was conducted online within the United States by The Harris Poll on behalf of York Public Relations from October 6-8, 2020 among 2,053 U.S. adults ages 18 and older. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact Mary York at firstname.lastname@example.org.