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Banks Bend Over Backward for Business
The Commerce Bank branch near Dupont Circle offers free lollipops, pens and piggybanks. Giveaways are a key element of Commerce's strategy.
(Photos By Michael Williamson -- The Washington Post)
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Even though banks typically lose money on checking accounts with an average annual balance of $5,000 or less, the potential for growth in the area has made them willing to spend as much as several hundred dollars to lure each new customer. That customer is likely to stay an average of seven years, and, particularly in the Washington region, that means the bank can earn thousands of dollars from loans, investment accounts and other services aimed at getting a larger "share of wallet" from each accountholder.
"It's all about the checking account," Commerce Bank chief executive Vernon W. Hill II said in an interview in Washington last year. "Everything follows from there."
Yet all the branches, advertising and giveaways may be of little use unless customers are willing to do the often hard work of shopping around. Many are not.
"I've stayed because it's easy to stay," said Albert Scariato, a District resident. He said he has wanted to switch banks for two years.
Alenka Grealish, manager of the banking group at research firm Celent LLC, said banks have to be "hitting on all cylinders" to move the switching needle, especially in Washington, which has a bank branch for every 2,000 people, the highest rate in the country.
"Customers have to be really angry to switch," Grealish said. "It has to be a series of customer service failures, or getting hit with a lot of annoying fees."
The rise of online banking is making the bank-customer relationship even stickier. While less than a quarter of all bank customers use online banking, its use is increasing rapidly. As it spreads -- along with free bill payment systems and other financial relationships monitored online -- customers are even more loath to start again with another bank.
"If a customer has a fairly well-entrenched set of relationships with online banking, it gets really hard," said Kathleen Khirallah, retail banking research director at Tower Group Inc. "It's a nuisance to unwind these relationships.
Though Machir has heard and seen the offers of no-fee banking, extended hours and product giveaways, he is not sold on the need to close his Citibank account and move elsewhere. While the $80 he spends each year on fees and a few annoying service glitches make it tempting, "the time and effort it would cost to switch are not things I want to spend," he said. "For me to switch, someone would have to offer something far superior."
