The Twisted Logic of the Mega-Banks
Hardly a day goes by that I’m not reminded as to why a growing number of disgruntled consumers distrust and hate big banks – even the ones where they bank.
I was greeted by this headline in last Thursday’s newspaper.
Jumping on the debit card fee bandwagon, Wells Fargo announces a $3 monthly fee test in Georgia, Nevada, New Mexico, Oregon, and Washington. I’d love to know the criteria for choosing these five states.
Obviously, the bank strongly believes it needs more fee income so why not “man up” and begin charging it all over the country? Why punish a select number of consumers in less populous states?
What really aggravates me is the mega-banks ongoing posturing about how the consumer has been getting a free ride all these years and how the banks are being punished by regulators and legislators resulting in the need for more revenue to stay in business. Their collective “poor me” attitude has worn thin.
Let them fail is my mantra.
If you look at the bigger picture, what emerges is a mega-bank brain pretzel of twisted logic. To some it might appear as though they’ve surrounded themselves with a circular firing squad.
Here are some of the reasons why I’ve reached this conclusion.
- For years banks have embraced emerging technologies to keep consumers out of the expensive branches by using ATMs, debit cards, computers, and now, mobile phones.
- Now, instead of closing or downsizing branches to reduce costs, they’ve realized that they need the branches for cross-selling and are concerned about the fewer number of customers visiting the branches. Banks like Chase are actually opening more branches.
- Thanks to the ongoing deep recession, banks are awash in deposits that can’t be loaned to borrowers and are therefore considering a safekeeping fee like the one recently initiated by the Bank of New York Mellon. In other words, banks don’t need more idle deposits sitting on the books as it is costing them money.
- Wells is proposing to waive the $3 monthly debit card fee if the customer agrees to keep a minimum balance in his or her account therefore adding to the growing deposit base. Hey – do you need more deposits or not?
- Banks introduced debit card rewards programs – first as a way to differentiate themselves from the competition and later as a defensive move. Of course they are promoted as a customer appreciation program.
- Now, thanks to the Durbin Amendment, banks are rapidly dropping debit card rewards programs as the merchants were tired of paying for them via the high interchange fees being charged. So much for customer appreciation.
- Driven by greed, over a period of many years banks increased their ODP fees, supported high interchange fees (remember, it was the big banks that started MasterCard and Visa), and engaged in risky mortgage lending.
- As a result of a growing volume of consumer complaints, the government cracks down on banks with new and updated legislation and the first reaction by the big banks is to drop free checking while adding new fees and increasing existing fees – while complaining that the free ride with checking is over.
As I see it, this type of information comes out in dribs and drabs and very few, if any, consumers actually see the inconsistencies and contradictions described above.
But when looked at in the aggregate, senior management at the big banks appear to be incompetent.
Of course, knowing that your bank is simply too big to fail enables you to engage in all sorts of strange and inconsistent behavior while having a “customer be damned” attitude.
Oh, by the way, on July 19, 2011, Wells Fargo reported record second quarter net income of $3.9 billion dollars, up 29% from the prior year and up 5% from the prior quarter.
It makes you wonder how many of the bank’s retail customers would leave the bank immediately if they received this information along with the notice of the new $3 monthly debit card fee?
The mega-banks behavior is appalling.
Now for the good news if you are a community bank or credit union – you can take advantage of this behavior in your markets by launching a disruptor marketing campaign. Details are available here.