November 4th, 2011
Big Banks Drop Debit Card Fees, But Can They Still Hold on to Customers?
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Wells Fargo, Bank of America and Chase announced that they’ll be dropping plans to charge customers a monthly fee for using their debit cards. This comes after a month of consumers protesting the fees and threatening to leave big banks with movements like “Bank Transfer Day,” Occupy Wall Street movement and other local demonstrations.
Wells Fargo stated, “As we adjust to changes in our business, we will continue to stay attuned to what our customers want.” Bank of America had a similar statement, claiming, “We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee.”
It seems like a win for consumers, but it begs the question,
Is this the end of bank fees?
Faced with the Dodd-Frank Wall Street Reform Act, which is still rolling out its amendments, big banks will lose a lot of revenue. Just two pieces of the act, the Durbin Amendment and the Volcker Rule, will see 10 of the largest banks losing more than $9 billion in annual revenue.
When it comes to small banks, they have less wiggle room in their budgets to work in the costs of new banking regulation compliance. All around, there is pressure to come up with more funds or cut costs dramatically.
From a business perspective, banks can’t sit idly by.
How can banks respond?
There are several tactics banks might take to absorb the impact of the inevitable revenue loss and new costs of regulation compliance:
- Layoffs. Banks will likely be forced to cut losses in the form of people.
- Fewer services. Like having weekend hours at your bank? Services like that could be the ones on the chopping block.
- More fees. And the kicker—more banking fees. While we may not see another debit card fee, some banks have begun to raise their monthly account fees and do away with free checking.
How should banks respond?
The current consumer sentiment is resentment. Banks blame their need to resort to new fees on the government’s new industry regulations. Customers blame the banks for not being on their side. And the government blames, well, the whole financial industry for letting the economic situation get out of control. However, American consumers are also to blame in this economic crisis for borrowing what we couldn’t afford to pay back.*
But that doesn’t change the fact that big banks are a huge player in this country’s economic game and in servicing consumers. They should respond by making moves to help, not hurt them.
What those moves are remains unclear. But with banks aiming to please shareholders, it’s easy to see why the American public is responding to movements like Occupy Wall Street, Move Your Money and Bank Transfer Day.
In October alone, at least 650,000 consumers across the nation joined credit unions, accounting for $4.5 billion in new savings accounts. More than 70 percent of surveyed credit unions reported growth in membership and deposits, according to the CUNA. Only time will tell if this trend continues, or if banks will catch on and find a way to turn around their loss of customers.
When we polled our Facebook community earlier this week to see if they would stick with Bank of America now that the debit card fee is off of the table, only 22% responded in the positive. It seems the rest still aren’t too sure about big banks.
How do you think banks should respond?
Have a Karmic day,
Bethy Hardeman, Social Media Maven
*I realize this is a generalization. The entire economic crisis from a consumer standpoint cannot be boiled down into one statement.
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