BofA Takes it Slow and Tests New FeesMarch 9th, 2012 | Posted by in Financial Services | Uncategorized
Last week, the Wall Street Journal shared that Bank of America is considering changes to its checking account fees. The fees being considered are steep and range from $9 to $25 a month, though customers could avoid fees through actions like maintaining a minimum balance or adding a mortgage.
In this latest step, Bank of America announced that it will pilot these programs in Arizona, Georgia, and Massachusetts. In recent years, many banks have quickly rolled out new programs that ended up not working and hurting performance. For example, Bank of America tried introducing $5 monthly debit card fees but experienced significant backlash and had to roll the fees back.
We are glad to see BofA testing before a broad rollout this time around. This approach will significantly reduce losses from programs that do not work. However, there is more opportunity to understand how to market these types of initiatives.
Wal-Mart has been widely praised for their debit card that comes with a $3 monthly fee, while Bank of America was vilified for having only a slightly higher fee. Banks need to improve marketing efforts to both highlight the services that come along with the fees and provide more transparency in their pricing.
American Banker wrote recently about a new credit card from Barclay’s that is aimed at providing more transparency. Among other features, customers can quickly and easily see “how adding or removing certain features would affect the card’s pricing.”
Providing greater transparency and making it a central part of the marketing message could help big banks avoid the backlash they have been facing and make product changes more successful. Part of testing new fees should include testing different messages to provide transparency and highlight the value proposition to the customer. As Bank of America and others have realized, it is hard to predict how customers will react to a particular message, so trying different approaches will be important to make these programs successful.
Finding ways to introduce new fees and increase profitability is a fact of life for banks today. So far, many of these efforts have been unsuccessful, but banks are starting to get smarter to find what works. After all, if airlines could find a way to introduce many unpopular new fees, banks should also be able to find an approach that works.
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