There is a bit of a media frenzy going on right now about the idea of consumers cutting the cord to their bank (or DVD rental company) due to new fees and/or price increases. There are even t-shirts (see inset), a sure sign things are getting a bit crazy.

Within the industry, there's been much debate over whether consumers will actually act upon their frustration and move accounts to "main street" banks and credit unions. 

Certainly some will (see update). One of our young employees just did, thanks to the debit card fee. You probably know someone that has too. And most likely, it's someone with relatively simple finances. Because those of us with more complicated situations brought on by marriage, children, home buying, car buying, credit card usage, business ownership and so on, face a daunting lists of tasks to move our accounts (see below). 

While millions will change banks to lower checking costs, most will stay put because they are satisfied overall or they simply want to avoid spending a good part of a Saturday going through the tedious switching process. Tools designed to ease the pain, such as Deluxe's new SwitchAgent, can help (see screenshots from FreeStar Bank below). But it's still a painful process (just look at that last worksheet), even if you have a friendly helper on the phone providing moral support and making calls on your behalf.

This doesn't mean you can ignore customer needs, or tack on new fees willy nilly. Because eventually you are going to need new customers, regardless of how lethargic your existing ones are.

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Switching a checking account in 1987
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In the old days (like back when I had simple finances), all you had to do to switch your checking account was:

• Go to the branch of your new financial institution and open a new checking account
• Decide what style checks to order
• Figure out how many outstanding paper checks you've written on your old account and  make sure you left enough money in the old account to cover them

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Switching a checking account in 2011
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In addition to the above (you might be able to save the trip to the branch if full online account opening is offered), today's wired consumer must also do the following:

• Contact the merchants, insurance companies and financial institutions who use preauthorized debit to grab money from you each month, and switch them to the new checking account (and hope they make the change in the time period they promised)
• Contact your HR department to switch payroll direct deposit to the new account
• If you have overdraft lines of credit, apply for new ones at the new financial institution
• In online banking, cancel all the pending payments
• In online banking, write down biller and payee contact info and capture any history you want to record
• In online banking, download/print transactional history or record any historical info you need to keep; including check images if necessary
• If you use e-statements, download and save all prior statements
• Register for online banking at the new financial institution and reset your preferences and security settings
• Register for mobile banking at the new financial institution
• Reestablish email and mobile alerts at the new financial institution
• Find convenient and free ATMs that support your new financial institution
• If you have a car loan or mortgage at the old financial institution that offered a discounted rate for automatic payments from their checking account, you may want to keep the old account open with enough cash in it each month, until those loans are paid off

And repeat the whole process if you also have a business checking account you want to move at the same time.

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Update (28 Oct): Raddon published an article today showing no change in the number of consumers saying they closed an account (during the past 12 months) in 2010/2011 compared to 2005/2006. The closure rate in both periods was 9%. 

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Freestar Bank is running a large switching ad on its homepage (one of five in rotation)

SwitchAgent landing page (link)
Note: Switching service is powered by Deluxe's new SwitchAgent program that handles the heavy lifting for a reported $60 per switch

Downloadable form to be filled out before talking to the SwitchAgent (link)

Note:
1. Fee-H8R graphic tees available from CUNA here.
2. We write about these issues and much more in our subscription service, Online Banking Report.

"The biggest profit center at banks is customer ignorance, which banks have mistaken for customer loyalty."
-- Gary Hamel, speaking to 1,000+ bankers at BAI's Retail Delivery Conference, Nov. 15, 2006

I've always been a sucker for management-guru speakers. I can still remember Tom Peters speaking at a sold-out show in Peoria, Illinois, back when I was a wet-behind-the-ears management-trainee for Caterpillar. It was 20 years ago during the height of "In Search of Excellence" mania and it helped me realize a lot can be done to improve business performance.

So every year I make it a point to sit up front when BAI trots out the guru-du-jour to inspire the banking crowd. This year, it was Gary Hamel, a Harvard guy that, I'm sorry to say, I hadn't heard of prior to Wednesday (see the End Note for a summary of his recommendations presented to the BAI crowd).

But man did he grab my attention with his challenge to the assembled bankers and tech-company reps (see quote above). He believes banks are vulnerable as customers become better equipped to compare the price of various financial services, a natural role of the Internet.

The importance of switching tools
Hamel believes financial services loyalty will disappear once customers discover how easy it is to move their accounts to pick up a hundred basis points on their savings rate, or avoid $35 overdraft fees.

In his BAI presentation, Hamel pointed to U.K.-based uSwitch <uswitch.com> as an example of a new tool to help financial customers compare and switch banking accounts (we'll profile it in an upcoming article).

As Hamel was delivering his keynote, Intuit was busy in a nearby Mandalay Bay eatery briefing analysts on its new account switching service, scheduled to go live December 15. The clever service is built on the Teknowledge aggregation engine acquired last year (data sheet here). Intuit's service is similar to Yodlee's service announced in September (see our coverage here). We'll be covering it in more detail as it goes live. 

End Note:

Hamel's management philosophy
I have yet to read Hamel's books, but what he talked about Wednesday could be boiled down to the following:

• Employees shouldn't be "managed" they should be "led."
• In practice, he'd like to see nearly all management eliminated and replaced by small, self-managed teams working to achieve company goals.
• As much as possible, teams would make their own product, pricing, and staffing decisions.
• Compensation would be highly dependent on the team's results in achieving the ambitious profit goals set for them by the company.
• His examples: Whole Foods, W.L. Gore, and Google.      

This week Yodlee announced its new Bill Pay Account Accelerator, a bill-pay-switching tool designed to help banks attract active users of competitive bill payment services. Not only does Yodlee's wizard move payee information, it also can cancel and move previously scheduled payments, including recurring ones.

The service will be piloted in fourth quarter and launched in early 2007.

Analysis
If it works, it could reduce the "retention benefits" of electronic bill pay by making it easier to switch banks. The American Banker article reporting the new service hit hard on that aspect. However, we think the concern is overblown. It's not that time-consuming for most people to move their payee information, requiring 10 or 15 minutes of "cutting and pasting" or "scribbling and retyping," then a few more minutes to reschedule upcoming payments.

What's MUCH harder for the user is making sure outstanding paper checks have cleared and, more importantly, unwinding preauthorized debits such as important insurance and loan payments. Those require contacting the payee directly and hoping that your instructions to change the debit are processed in a timely fashion.

But the biggest issue is motivating users to make a checking account switch in the first place. And that's where Yodlee solution could provide a big boost, offering the perception of radically simplifying the switchover. And if Yodlee expands the tool to also transfer the entire account history, not just the bill pay history, it could become an important industry tool.

Since it doesn't ship until next year, we'll refrain from superlatives until we've had a chance to test it. But Yodlee has a good track record in hooking accounts together, and we expect the new service to be functional. However, whether banks will adopt it is another matter. It will have to be drop-dead simple to use or banks will not want the ensuing customer-service nightmare.

AmSouth Bank has posted a new "special offer" on its home page. The bank's "Click to Switch" program promises, "The fast online way to tell your bank it's over."

Clicking on the graphic leads to a page with some advice for switching checking accounts. It's the usual laundry list of advice, none of which is really helped by the online connection. There is one useful link for changing the direct deposit of social security benefits. Though, that is likely to be of little use to most online users contemplating a switch to AmSouth Bank.

We like what AmSouth is doing, we just wish there was more meat in the offer.