My name is Dennis Santiago. I am the CEO of Institutional Risk Analytics, a company that most of the world had never heard of until December 29, 2009. That's the day the country became aware of a tool we donated to help the MoveYourMoney.info campaign. The response to this tool has been inspiring. The large outpouring of a nation expressing itself remains one of the wondrous things about being an American. In this blog, I'll be writing about my observations from behind the computers and analytics. I will try to be factual, educational and maybe even a little entertaining. I hope you enjoy the journey with me.
Today marks the seventh day since the campaign activated the zip code search tool. In the 168 hours that have transpired, Americans have searched for banking alternatives in 16,631 zip codes. With roughly 42,000 zip codes assigned that's just under forty percent of the country actively asking the question "what can we do to effect change?" During this time we've been flooded with questions, which taught us a lot of things. Just so you know, we literally cobbled it together in about four hours and spent another four hours cleaning up the look. Then America got to field test it. During the first 48 hours we spent most of our time bomb-proofing it. You'd be amazed what people will type into a box that says "enter a five digit zip code here." Mischief managed, we were able to shift the system over to its full traffic configuration. Congratulations, America! In those 48 hours, over 115,000 of you stress-tested that tool and in the days since you've been continuing to use the tool around 45,000 times a day.
So the burning question, of course, is "will moving your money have an effect?" And by effect, I don't mean making a momentary political statement. I mean making a structural difference to the country's financial system. The answer is yes, and here's how.
Inside banking there's something called a "core deposit" that every American should know about. These are the most important deposits to a bank. It's the money relied on the most as the foundation for the business. The most important core deposits include the checking and savings accounts of consumers and businesses. Your accounts! All other forms of deposits and advances, and there are a number of them, are less attractive sources of funds to support a bank's lending engine.
For each lending dollar of a bank, increasing the fraction of support for that lending dollar by core deposits (versus other forms of money) means greater confidence and stability for that bank. The effect is less pronounced in institutions that have large fractions of their business model involved in investments that yield income from non-lending uses of funds. This means it's the community institutions focused on purer "classic" banking operating models that get the most bang from your buck ... literally. So if the public shifts a small fraction of the nation's core deposit base into these institutions it magnifies the stabilizing effect on this portion of the financial system. That's provided the receiving bank is already in good shape, of course, and isn't saddled with other problems. That's why the listing tool we created for the MoveYourMoney campaign only shows the best of breed, to our best ability to identify who they might be. In future blog posts I'll discuss other types of banks and the issues facing banks not in the greatest of shape.
As one might surmise, competition for core deposits should be fierce. Congratulations on your first lesson on the inside baseball of banking. Yes, it is fierce. It always has been, all the way back to those proverbial toasters. Don't think for a minute the big banks -- and, yes, credit unions, too -- won't respond to compete for your business with their own 21st century version of toasters to woo you. They are all tough competitors in a tough industry. But that's the point, you see. It changes the game. It's all about the core depositor again and the power of individual Americans to flex the muscle we've always had.
It's the American people that are the "shock and awe" in this. Without you, it's just another embedded video and piece of web enabled software.
Follow Dennis Santiago on Twitter: www.twitter.com/DennisSantiago
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The aspect of punishing large banks for their flagrant behavior in paying obscene bonuses to those whose bad bets the American taxpayer paid off is a feel-good for many, no doubt.
But the real magic is the life it can bring to local communities all over the United States. BRAVO!
The last time I checked Community Banks and Credit Unions also have fees albeit lower.
So from now on we will be using our local bank for any loans we may need. We already use it for checking and savings. The service is great.
'forum(s)' from which you gleaned the idea. My main bank was on the list and I am thrilled to let BOA maintain my no-fee national account for those occasional deposits from far-flunged fanciers.
After working in the community banking field for more than a decade for several institutions, I must let you know that it is 'TRUE' - Community Banking is Better.
They have all of the products that a larger institution has (very rarely lacking that is), and usually free, if not, a nominal fee.
There has been some whining about not having access to your cash (i.e. branches on every corner, ATMs at each street light, etc.) Well here are some solutions: Plan in advance, get cash at deposit (more than you think you might need - you can always put it back in), get cash back at stores (though some require a minimum purchase, buy something that you need to meet the minimum, and WHAM you've got cash), and last of all (but only last) use another institutions ATM, knowing in advance the fees you will incur from the providing institution as well as your own.
Believe me, the ATMs on every street corner from the big-guys (TBTF Banks) are not there for the convenience of their current customers, they are there for fee generation. Sometimes up to $4.00 a pop, and more, not including your banks' and or credit card company fees.
Using "Convenience" for staying at a larger institution is not an option in this day and age.
Move Your Monies Now!!!
OTOH - the system needs new credit creation or it collapses in a deflationary heap. It's a fine line but TPTB have gone WAAAAY too far in the inflationary/cheap credit direction.