Chillin' out till it needs to be funded
New fees introduced in four states incl. Arizona, Georgia and Massachusetts in slabs of $6-$9 for “Essentials” accounts and $15 and $25 for other “Enhanced” and such styled accounts are not really now as retail savings banks continue to roll in large fee incomes to support branch superstructure and grow incomes and profitability now all the more critical after the Durbin amendment and other constraints under the supervision of the Consumer Finance Protection Bureau. As service providers like Credit Rating reporting and many other non banks get more regulatory charges, those costs will also be recovered by banks from paying customers. Of course in 2009 while most banks had a free checking account offer, none have that available anymore.
Wells Fargo has been charging $15 for its accounts, waived off for customers who have a mortgage and / or those who can maintain $7500 balance or htree different accounts with the bank. Bank of America’s enhanced account forgives you the fee for using your credit card once a month or a low minimum balance which does not seem difficult for customers a t all. Next stop, many branches in the North East will be rolling out these tiered fees to encourage users to commit business to the bank and allowing customers to nod to the fee in return for snot value or being able to boast about relationship privileges on their accounts. Of course these privileges can go on to include higher interest rates and lower charges for issuing checks or money orders, services whose prices have gone up from 100% to 600% in the crisis as banks continue to make at least 33% of their retail banking income and most of their fee income from retail customers as much as SMB commercial lending program customers. Cashier’s cheques according to the Durango Herald cost $12 from $3 while Credit Unions and the Bank Transfer Weekend over Debit Card Program fee had limited successes with the CUs getting 1.3 mln new customer accounts from less than a million customers in the second half of 2011
Of course, fee never told upfront include $2 non bank ATM charges for not maintaining the minimum conditions on the account, overdraft charges on your debit card have been discontinued even as the CFPRB gets busy with the myriad regulations on the retail banking superstructure as it gets ready to buss Payday loans, Debt Collection and many such non banking business to deal with the litany of hidden fees that remains the most favored retail banking strategy instead of the cross sell this summer. Overdrafts, luckily have already been penciled in to the regulations as not allowed to charge automatically.
BofA lost $2 bln to the Durbin Amendment. Of course some of these charges do have a logical basis for them but banks have shown that the relationship charges , started off as a low key affair could also soon balloon into other charges and costs that will force more regulatory action against banks. On the other hand investment accounts and brokerages continue to pay retail customers for their business with the competition for the customers accounts, making retail banking a much privileged and effective business model to broach in banking because of such fees that paying customers will not mind paying.
As of now this fee income does not reach investment bank bonus pools at the bank even as Dodd Frank removes the allowance of such retail deposits for investments and trading or risk taking by the bank instead of lending to bonafide businesses on paper, or investing in secure traditional investments, even favored by Sovereign wealth funds from Korea and Israel to Abu Dhabi and Singapore
The $15 fee for example just requires a $2000 deposit to be waived off or a $5000 average balance across linked accounts, but it could also mean a better rate on your mortgage or a better investment and card product for you if used judiciously along with the repositories of customer data available with your banker but till now few have shown the ability to ring in the customer based on that special relationship, instead relying on cannibalizing similar products at similar sized banks to lose the home run advantage and cluck out in a crisis like when the Durbin amendment brought down usurius fees of $0.44 cents for the transaction or even when the CARD Act required banks to get more upfront about the interest being charged to them on their credit card accounts.
Of course that means a loss of banking privileges for the less fortunate, like students who do not have a loan due or means to maintain even the “Essentials” accounts charges, esp if unemployment hits more fringe customers that bigger banks are preferably okay to lose to the Credit Unions. However as American Banker mentions, banks are not going to go for cross product benefits unless P&L can be equitably divided between products sharing the fee/ incentibve to grow relationship based business for the bank. BofA has 57 mln customers who have to go throught he transformation with the bank and implementation is also likely to be like Mom’s weekend cookies for many customers, not knowing how the same combination would turn up differently for others given the more than 30,000 retail bankers at BofA alone along with similar workforces for wealth, investments, loans and cards businesses.