Monday, October 31, 2011

Wells, Chase, Others Back Down on Debit Card Fees

Hey baby, there ain't no easy way out.

Wells Fargo announced on Friday that the 5 state test of debit card fees started on October 14 will be canceled.  TD Bank, the Canadian bank that acquired Commerce Bank last year, followed suit.

And, word is leaking out of Chase, accoding to the AP, that they will stop charging their $3-per-month fees when the current Wisconsin and Georgia pilots end next month.

Bank of America had news on Friday, too.  As with Chase, an unidentified source told the AP that B of A will offer ways for its customers to avoid debit card fees through using direct deposit, maintaining minimum balances and/or using their Bank of America credit cards.

Citibank, where debit card fees are already implicitly reflected in fees as high as $20 a month for the underlying checking account, is going to town talking about their never did, never will policy towards debit card fees.

Countering that, at least one credit union - Bethpage FCU in New York - is offering Free Checking for Life for new members of the Credit Union.  With commercial banks (like Chase) offering bounties of $100 or more to acquire a new customer, that might be pretty sharp marketing - communicating peace of mind and value, and spreading the bounty out over a longer period of time.

One thing is for sure.

The Waiting is the hardest part.  Tom Petty and the Heartbreakers, THANK YOU for supporting KCSN and playing our beautiful little Plaza del Sol theater at Cal State Northridge on Saturday night.  We will never forget you.

Wednesday, October 19, 2011

Relative Strengths of Banks v. Credit Unions

Copyright California CU League, graphic Joe Lackow 2011
In the past couple of weeks, we've seen a lot of anti-bank sentiment in response to the announcement of debit card fees, in the wake of reduced interchange income for the banks.  It has been salt in the wound of a huge bailout and  the role of banks in the foreclosure crisis, followed directly by bonuses and record profit.

This has extended to at least one representative in Congress who stood before us and told Americans to dump Bank of America to send a message about the $5 debit card fee.  I don't know about you, but as much as we may find banks culpable, I don't think that is very fair, nor is it the place of government to do.

As if consumers needed to be told, anyway.  They know how to vote with their feet really, really well.

And the Nightly Business Report video in the upper right of this page is but one example in a torrent of media coverage about Americans leaving B of A and other big banks in droves, and heading to their latest credit union.  In fact, one of our major CU clients hung signs in their branches with a big $5, in a big red circle, with a big red slash through it.  Other reports, from credit union leagues to the bar on the corner, are that there is a significant uptick in CU membership happening right now.

But whether you are a bank or a credit union or a consumer, there is something solid to be sold and to be bought, and tradeoffs to be made.  As the NBR report suggests, those who value convenience and security and the latest technology might do well to stay put with their big bank, because they do those things well and provide value for those fees.  And those who are value-oriented, prefer a bit more old-fashioned service, and care about credit union values like co-ownership would do well to investigate their credit union options.

Regardless, it's time to face facts, America.  It costs quite a bit for a bank or credit union to do all it needs to do to provide you with a good, solid, safe checking account, and there is quite a bit of value there - despite the fact that this has been given away by so many and for so long.  As always, it is a matter of understanding what one's customers and members want and demand; how one's competitors react and what they offer and charge; and the overall environment in which services are offered and consumed.

And most of all, every financial institution and every American should understand that BANKS DON'T MAKE MONEY OFF A SINGLE SERVICE CHECKING RELATIONSHIP, AND NEVER REALLY COULD.  It is the broader customer relationship that is profitable, to all concerned.  And to those who point to customers who generate a lot of NSFs and overdrafts, let me tell you something.  Relying on the kind of marginal customer who generates enough of these fees to seem profitable in the short and medium term will jump up and bite you on the ass one day - when they go belly-up on you.

Almost everyone's financial needs extend well beyond a checking account, and it is crucial to seek out relationship, whether based on transactions, consumer credit, home oriented lending, saving, investing, insurance and most likely, a combination of these that is market segment-specific.  Banks and credit unions will be most successful as they become more consultative, and move towards fee-based offerings like financial planning, retirement planning, college savings and planning, and medical savings and planning.  Rather than trying to make money on a sure loser, and one that has never really been logically charged for before.

You know where I'm going with this.  Where we always go.  To the GIS, where all of this data is integrated in one place to support informed product, service and fee decisions.

Saturday, October 15, 2011

Debit Card Fees - Betting On Inertia & Control

Ann Page, B of A's spokesperson, told the NY Times the other day that the Bank did do "extensive research on how (customers) would react to a new fee and whether it was fair."  And that what this is really all about is that "People like online bill pay, it's convenient and safe... the lower attrition rate that came with it was simply a result of offering a valuable service."  She also pointed out the value that fraud protection, overdraft protection and lots of ATMs add to the debit card and the checking account.

The suggestion is that, when you put this all together, the research showed it was worth the added five bucks a month to an awful lot of customers.

However, there is online bill paying scheduled through the bank; and then, there is online bill paying done directly with the folks who are billing you, in which you provide the merchant or service provider or other bank with your routing and account number.  It is the latter that is much more prevalent.  Banks don't control online bill paying, they offer the convenience of aggregating and scheduling the payments in one place.  Which is valuable.  But not prevalent, and not growing anywhere near as fast as online payments in total.

But, even more importantly, we have two old, old sayings in retail banking administration that are really important.  One is that a legislated solution thrust on banks is the worst possible thing that could happen to everybody.  And the other is that, when you do need to impose or raise fees, one does this QUIETLY.

Well, the horse is kind of out of the barn on the latter.  And, on the former, there is a bill in Congress that will reduce the inertia and friction of moving a checking account to another bank when one has linked many electronic payments to that checking account.  In essence, the "Freedom and Mobility in Consumer Banking Act" will make it as easy to change checking accounts online as it is today to transfer credit card balances.  One will simply provide the routing and account number for their new bank to their old one.

That is why debit card charges make sense, but are a bad bet on inertia.  Despite the research.  Despite the the fact that online and mobile payments are making checking "stickier" and the numbers show that fewer Americans indeed are changing banks.

Then, there are the issues of context and timing.  Corporate earnings are high, on the way to job creation and new investments.  But so is unemployment, and people are losing patience.  So much so, in fact, that the context of the debit card fee introduction is the Occupy Wall Street phenomenon. Worst, worst of all, is failing to calculate the loss of immeasurable goodwill for the Bank and the industry.  When your actions fuel a fire that brings heat down on your whole industry, and protesters start looking for you at home with their demands -  this, this is not good.

Research is there to be applied, not to pass judgement.  As an old boss of mine at a big research supplier used to tell our clients, senior marketing people at major corporations, "Well, if it did, we wouldn't very well need you, would we?"  I also recall my COO at Great Western Bank, who once told me as his strategic planner, "You are looking out the back window.  And I appreciate the view.  But don't try to drive the car."

So, B of A did do their homework.  They just did it wrong.

But the fact is, a good checking account costs and is worth a lot.  Consumers are going to get used to understanding all these costs first, and then the value.  And then, we are going to be able to have everyone pay their fair share according to how much Bank they consume. 

And we'll find a much better time and a better way to tell them about it.

And, of course, GIS will play a role in creating, and communicating, the value the customer receives and why this costs so much damn money.

Thursday, October 13, 2011

Don't Charge Me for Using My Own Money!

Bank of America's proposed $5 debit card fee is offering a virtually unprecedented treasure trove of consumer feedback.  Nearly every major newspaper and financial website has content and user comments about the proposed fee.

One of the richest sources is certainly at, where nearly a quarter million citizens signed a petition to the Bank to rescind the fees.

One thing is becoming very clear.  At its root, the consumer marketing question for a bank remains the same - don't charge me to use my own money.  Consumers perceive that they should not be paying for accessing their checking accounts via card rather than via check at the point of sale.  What also remains is the fact that consumers don't understand the costs to the bank that are involved.

At the end of the day, consider that it is far better to sink these costs into the overall cost of monthly checking, than to charge explicitly for the debit card or use of the debit card that accesses it.  And there can be two kinds of Checking - one with debit, one without, priced accordingly, and perhaps differing somewhat across markets.

So, use all this consumer feedback as a departure point for engaging your own customers and prospects about this, by e-mail, on the web, in social media - and in surveys and focus groups.  And analyze how their concerns differ by segment and place in your GIS.  Then, you'll be in the best position to reprice and communicate.

Tuesday, October 11, 2011

BAI RDC Online

Want to act more like a retailer but can't make it to Chicago?  Check out BAI Global Connect, where re-imagining the branch, and the banking role at the point of sale, are dominating the buzz.

Friday, October 7, 2011

The Most Famous $5 Ever - Bank of America's Planned Debit Card Fees

Graphic: Joe Lackow
That's what CNBC called it.  PIRG called it a kick in the head.  Bert Ely, one of the most quoted banking consultants around and with good reason, called it an incredible marketing and PR debacle instituted without research or competitive positioning.

And, Jay Leno, on The Tonight Show, called it "B.S. of A."

I say, you didn't do your homework, Bank of America.  You did not consult your GIS, you did not do your financial analysis, you did not research your customers, you probably asked your customer contact staff but then ignored them anyway.  And you sure as heck didn't call RPM or Bert Ely or Dave Kerstein or Steve Reider - or anybody else  - for data or focus groups or surveys or social network monitoring.  And boy does it show.

Banks used to make 44 cents from a merchant debit transaction.  Now they make 21 cents.  So.  The bank needs to recover 23 cents a transaction, and at $5 a month, that is about 22 merchant debit transactions.  Some people make that many, some make even more.  Most don't and quite a few make just a few.  And a whole lot of folks have a debit card they didn't even ask for and don't even use - they just wanted a Checking account and an ATM card - and they are really going to be wondering what the hell this five bucks gets them.

The bank has really good GIS people, great branch networkers, I know that for a fact.  But I don't think management ever asked them to look at the GIS and determine which lifestyle segments make the vast proportion of debit transactions, and where they are.  Hell, they had a hard enough time getting funded for a contemporary GIS at all.  It would have been a small investment to determine test markets, rationalize the pricing, find ways to cut branch costs, and communicate the changes in an information-driven way - and collect a windfall nobody would take offense with, not to mention avoid national umbrage and great annoyance expressed on late night TV.

It's even worse than that, evidently nobody ever asked Marketing or Planning either, and did a competitive matrix, and see who is charging what and where and to who and for what.  And that would also have clearly shown that $5 is out of whack.  $2 or $3 sounds so much nicer.  More like other banks charge. And more accurately reflecting the "lost" - reduced - revenue.

Add some uncharacteristically poor PR, et voila, you're not on Letterman's Top 10 list, you ARE Dave's new Top 10 List.

It's been a rough time for the banks lately.  You might want to take body armor to the BAI Retail Delivery show with you this coming week.

And B of A, your website has been down a lot, too.

The old B of A would have done this in a market driven, information driven manner.  And the new B of A will learn heartily from this experience, and will do that.  I'm calling that one right now, they'll get this horse back in the barn.  And marketing tech will help drive that.

Wednesday, October 5, 2011

Vaya Con Buddha, Steve Jobs

Every product development person alive feels sick and sad right now at the passing of Steve Jobs, the greatest new product guy since Da Vinci.  Because, most of the whole world is saddened by this news, and no one in that world was not touched by this man and what he did.  But most, most of all, what a terrible loss for Laurene and the kids, my very best thoughts are with you tonight.

Tuesday, October 4, 2011

Apple Magic - Poof?

I thought the new iPhone 4s looked pretty cool at the unveiling today.  It's got the iPad 2 dual core processor under the hood now, better battery, much better wi-fi connectivity, worldwide compatibility, up to 64GB storage, and a MUCH better camera.

Courtesy of InfoWorld
And, it's the first version with Siri, the voice-driven intelligent assistant that Apple acquired the technology for last year.

But it's not the awaited iPhone 5, which a lot of people were expecting today.  No 4G.  No bigger screen, no improved case.  Etc.  So, while I see a much better phone, available everywhere now except on T-Mobile and MetroPCS, with the prior iPhone 4 just 99 bucks, it seems that disappointment abounds.

And it begs the question, is the Apple magic waning, in this, the start of the post-Jobs era?

Not really.

Despite the fact that early investments in Apple (like Xerox in a prior day) have made a lot of us wealthy, the fact is that Apple has never been able to sustain steady, long term equity growth.  Growth has been spectacular when it comes, but there have always been huge proportional declines.  Take a look at the chart and ask yourself, how is Apple to sustain the current growth trend?  Is there another iPad and iPhone to be pulled out of the hat?

Hint: it would be nice if a phone you buy today has 4G, which will be important over the total life of the phone.  Unless you like having to keep upgrading.  It would also be nice if someone really addressed - and emphasized - real cell phone security.  An unencrypted password for the phone and a 4 digit PIN number for my e-Wallet does not make me feel very secure.  Especially on an OS shot through of potential breaches.  And that is why every IT person you are likely to talk to will tell you that, given their preferences, there wouldn't be ANY mobile devices to manage securely in the enterprise, but the iPhone and iPad are clearly their preference if it has to be.

Back in the day, the lack of security nearly killed Windows in the enterprise.  Google would do well to take that lesson to heart with Android, and do it yesterday.  It is going to be an absolute given for Wallet, their mobile payment system, and everywhere security is a concern.

Which, unfortunately, and unhappily, is one long term trend that still appears to have plenty of upside in an overwhelming, international, climate of fear.