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.

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