Can Credit Unions Make a Success of Bank Transfer Day?

After becoming increasingly frustrated with her bank's poor service and expanding array of nickel-and-diming fees, 27-year-old Los Angeles gallery owner Kristen Christian went where many of her generation go when upset: Facebook. On Oct. 4, she created a Facebook event called "Bank Transfer Day," which urged participants to move their money from banks to credit unions on Nov. 5, and sent out invitations to about 500 people.

The event itself bore the hallmarks of something conceived of on the fly rather than the result of careful planning. The designated date, it turned out, is a Saturday, when many banks are closed and have limited hours, and the call was changed from withdrawing money on that date to withdrawing money by the fifth. Additionally, despite Christian's public claims that the event was independent of the Occupy movement, its location was listed as "Occupy Wall Street" for the first several days that reference was removed.

However, such minor details seemed irrelevant to the flood of people who began RSVP'ing and spreading invitations in the days after Christian first posted the page. Three days into its existence, almost 9,000 people had indicated their intention to attend, and as of Oct. 31, that number had ballooned to about 68,000. Obviously, the ideas behind Bank Transfer Day have struck a nerve, but why did it become so popular and in this particular form?

A confluence of trends

First, and most obvious, has been the spread of the Occupy movement throughout the country. While protesters in Liberty Plaza can march right over to the actual Wall Street to express their disapproval, supporters of the Occupy movement in the rest of the country don't have such obviously symbolic targets.

Virtually everyone does, however, have a bank account, and moving one's money from a "Wall Street" bank to a local, cooperatively owned credit union is a fairly simple step that sympathizers who live far from Lower Manhattan can take. As such, despite Christian's attempts to put a bit of distance between the event and the growing Occupy movement, the networks that have formed since Occupy Wall Street began have been vital to spreading the Bank Transfer Day's message.

Additionally, Bank Transfer Day is built upon a protest model that has been developing and evolving since the bailouts. Shortly after the Troubled Asset Relief Program was passed, there were a few scattered pro-credit-union protests of bailed-out banks, but the idea of politicizing the choice of financial institution picked up steam when The Huffington Post wrote about the "Move Your Money Project" in late 2009.

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The campaign, which encouraged people to take their money out of "too big to fail" banks in favor of community banks and credit unions, received a wave of positive press coverage when it launched, and its main video (directed by acclaimed filmmaker Eugene Jarecki) has been viewed almost 600,000 times on YouTube. When the project got wind of Bank Transfer Day, it helped spread the word by alerting its network of more than 40,000 Facebook fans and 3,000 Twitter followers. [Disclosure: The Huffington Post and DailyFinance.com now have the same corporate parent.]

As for the credit union movement itself, which obviously stands to gain most from the Nov. 5 event, the reaction was initially slow and cautious. Its first mention in Credit Union Timestook place on Oct. 10, when Mark Wolff, the Credit Union National Association's senior vice president for communications, said the trade group welcomed Bank Transfer Day as an expression of "just how angry consumers are becoming with their treatment by big banks."

Since those measured first statements, however, the movement has embraced the idea with increasing enthusiasm both nationally and locally. On Oct. 26, CUNA announced the release of Bank Transfer Day T-shirts, and both state associations and individual credit unions have been actively promoting Bank Transfer Day in their advertising.

Will It Work?

All of this begs the question: How successful will Bank Transfer Day actually be? On the one hand, a perfect storm of emotional frustration over new bank fees, sympathy for the Occupy Wall Street protests, and the positive benefits of credit union membership could combine to provide enough motivation for a critical mass of people to make the switch and thus alter the make-up of the personal financial services environment in a meaningful way.

On the other hand, it takes a lot more effort to change financial institutions than it does to RSVP to a Facebook page. DailyFinance reporter Catherine New noted that, statistically, 60% of people who start trying to change financial institutions ultimately fail to do so because of the complexity of the process. Additionally, certain voices within the credit union movement have been urging caution and expressing concern that some credit unions have been overreaching by bank bashing, that some of the new customers won over from banks might hurt rather than help their bottom line, and that a sudden flood of new deposits might cause accounting headaches by distorting capital ratios.

With so many factors at play, it's hard to know exactly what the financial services industry will look like once the Bank Transfer Day phenomenon has run its course. Will it turn out to be a simply symbolic gesture of frustration that raises awareness about credit union but leaves the pre-eminence of the big banks unscathed? Or will the event serve as a catalyst for a fundamental shift in the market share distribution between banks and credit unions, adding yet another headache for the already beleaguered banking sector to grapple with?

All that's certain is that the time until Nov. 5 will likely be one of the most contentious moments that the historically uneasy relationship between banks and credit unions has experienced in a very long while.

Matt Cropp is a Motley Fool contributing writer.