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.

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