Read The AMI Research Before Introducing New Checking Fees
They’ll regret not having read the AMI Research first!
It appears the days of being customer-focused and customer-centric are over for a growing number of banks.
What’s the problem?
A burning desire for more fee income at the expense of customers.
During the past few weeks I’ve encountered a number of articles about banks promising to add new checking account fees. And it appears this momentum is growing.
This rush to add new fees stems from recent legislation taking effect on July 1st of this year. The overdraft opt-in law has many banks focusing on new fees to offset the anticipated reduction in overdraft fees paid by a small number of checking customers.
I see it as punishing the many for the sins of a few.
After all, why should the majority of checking customers – especially free checking customers – be burdened with a new monthly account service fee to offset the loss of fee income paid by a small number of customers generating the bulk of overdraft fees?
Most likely, some number – perhaps many – of these checking customers will vote with their feet by switching financial institutions. It’s a safe bet that not all banks and credit unions will follow their competitors off the fee cliff.
Each time I come across one of these articles about banks adding checking account fees, I wonder if they’ve done any research to determine customers’ reaction to new fees.
Either they’ve read the Second Quarter 2009 ACTON Market Intelligence Best Banking Practices research and ignored the findings or they’ve simply not read the research.
When bank customers were asked why they closed a checking account, high fees frequently ranked high on the list of reasons. Here’s the data by geographic region:
24% said high fees
21% said bad customer service
21% said fraud or stolen ID
16% said they needed the cash
15% cited inconvenience
26% said they had moved
22% said they no longer had a need for the account
21% noted a dispute over the account
18% selected bad customer service
16% said high fees
40% cited bad customer service
25% selected poor interest rates paid
24% said they no longer had a need for the account
16% said high fees
16% noted a dispute over the account
50% said high fees
24% said bad customer service
14% said poor interest rates paid
12% said they had moved
11% cited bank instability
If you’re serving customers in the Northeastern or Western states, slapping a new fee on current checking accounts doesn’t seem to be a smart move, especially if it eliminates free checking.
For those of you with customers in the Midwestern and Southern states, you risk losing 16% or more of your customers to a competitor that avoids the knee-jerk fee decision.
Remember – we are in a deep recession and consumers are changing their purchase behavior. They are seeking value in the products and services they acquire. Now seems a very bad time to add new checking account fees.
And never forget that checking accounts are you sole remaining franchise. It’s the core relationship for your best customers. Don’t risk driving them away by adding a new, punitive monthly service fee.
Before adding a new checking account fee your current customers will have to pay, think about your explanation for this new fee. How are you going to justify it to your loyal customers?
While pondering this, remember the sage advice of legendary adman David Ogilvy, “The customer is not a moron, she is your wife.”
You can learn more about AMI research at www.actonfs.com/AMI.aspx.