retail news in context, analysis with attitude

The American Banker has a piece suggesting that the decision by some banks to levy monthly debit card fees on their customers, in an attempt to compensate for the regulation by the federal government of hidden and usurious “swipe fees,” is having a positive effect - on smaller banks and credit unions that are not assessing those fees on their customers.

In one example, according to the story, Community Bank in southwest Florida is taking advantage of the recent PR nightmare by “offering to pay people $5 per month to open a checking account instead of charging for debit transactions. In just a couple of days, it's become the most successful promotion in the bank's two-year history, and the institution partly has the bad mood of consumers to thank.” "We've gotten dozens of account openings per day,” Trevor Burgess, the bank’s CEO, tells American Banker.

The story continues: “Through a focus on personal, local service -- the bank takes deposits from local clients and makes loans locally -- Burgess says Community Bank has grown rapidly and has a high enough demand for new loans that it's able to actually pay people to open savings accounts ... Community Bank's not alone among smaller institutions in noting a change in consumer mood and a spike in activity since Bank of America announced it would charge customers who use debit cards for purchase. While B of A has taken most of the heat in the press, other large banks such as Wells Fargo and Chase are also testing similar fees.”

Another example: “Since the announcement, LA Financial Credit Union says it has seen requests for membership skyrocket. The credit union, which is open to anyone who lives or works in Los Angeles County, says it received 175 applications in the two weeks following the B of A announcement, compared to 27 in the same period in 2010.”
KC's View:
In other words, financial regulation is working, at least in this case.

Formerly hidden fees have been regulated and limited, forcing the banks to try to make money in another, more transparent way. Nobody is telling them how much money they can make, just that they have to be open about how they are making it. And then, customers have the ability to decide where to do business, based on an understanding of the situation.

There also an object lesson in here about how small businesses often can be closer to consumer attitudes, and able to compensate for changes of mood and new trends to create for themselves a differential advantage.

It does not seem to have happened yet - and some MNB readers believe it will never happen - but I am still waiting for some retailer to get out there with a marketing campaign that explains how the hidden swipe fees affected prices and how the retailer is now able to pass savings on to the shopper. It may be pennies on the transaction, but pennies add up, especially in economic hard times. And I am really astounded - and disappointed - that some smart retailer hasn’t taken advantage of the moment to tell consumers this story.