Durbin’s got the banking world in a tizzy. Where will it recoup revenue losses from expected lower debit interchange fees?
Though the amendment hasn’t officially gone into effect (mark your calendar for April 21), some lenders have offered a few possible solutions, including reduced rewards, added ATM fees and the elimination of free checking. JPMorgan Chase customers, for example, will no longer be able to earn points on their debit cards this summer specifically so that the can make up for lost interchange fees, reported The Associated Press this week.
But not just Chase is saying goodbye to rewards program, and more than likely, others will soon follow its footsteps. Certainly, this perkless world vision was described at a recent payments conference as the next reality for banking. Panelists and attendees alike maintained that not only are feebies endangered at banks nationwide, but new fees will creep up.
“Fees never went away, and they will get worse,” said PayPal’s CTO Scott Guilfoyle, during a panel.
Yet, Bankrate.com released a survey this week that found 64% of consumers polled would consider cutting their ties with banks that added in checking fees. These results got Bank Innovation wondering: would consumers actually flee their banks if checking fees were added? Or is severing ties more dependent on how banks levy those “fees”?
Sure, consumers would consider bolting their banks with added fees thrown into the mix, but the reality is that changing banks is a beastly endeavor, and laziness usually prevails. That will change — eventually — when new players and innovators enter the market. To-be-launched BankSimple is a classic example of a newbie that will strive to fill that need, and the bank might even enjoy the privilege of charging consumers a premium for its more-valuable banking experience.
But more established banks could fulfill that same need.
Recently, we spoke with Ron Shevlin of the Aite Group LLC, and he said banks simply do not provide enough value for the fees consumers are paying. Think overdraft fees. That value disconnect requires refinement — and soon. In other words, banks need to add real value to their offerings in order to charge fees, Shevlin told Bank Innovation. Practically speaking, he believes banks could charge a fee for consumers to use their PFM functionality as “that’s where the value is.”
“I’m a believer that PFM can become the platform for engaging customers,” he said.