By now I could fill a warehouse with the commentary on recent fee moves by large financial institutions and the wisdom surrounding them. Schools of thought include:

  • Large banks are clueless, recklessly pursuing additional fee income to fill the hole left by Durbin, overdraft, CARD act, and other fee-limiting legislation; and
  • Large banks have an adequately-thought-out plan to make unprofitable relationships at least marginally profitable or run them off

I’m in the latter camp (along with Ron Shevlin, who did a nice math exercise earlier in the month) but banks’ performance in communicating the increases leaves much to be desired. Large banks are waving the Durbin-hurt-me flag as they make their moves, but what they don’t understand is nobody cares what Durbin did to them. And nobody’s going to start caring. That said, large banks have every right to set fees as they see fit (and Rep. Peter Welch’s claims of collusion on the recent round of fee increases are nothing more than an extension of Durbin’s populist spew).

While I think the large banks believe the increases will induce desired customer behavior (pay fee, expand relationship, or leave), are there alternatives to these increases that many will see as punitive and arbitrary? Banks certainly don’t have any sort of bailout-related fee obligation, but after the U.S. taxpayers were kind enough to ante up a ton of bailout cash, why would these banks poke them in the eye again? Have we as an industry exhausted other avenues of actually providing new or enhanced services to these customers that they would value (and pay fees for) as opposed to slapping fees on products and services that have been free for years? Has the industry done everything it can to get impacted customers to leverage self-service vs. assisted service channels to improve the profitability of these relationships while at the same time improving customer convenience?

The scale of the exodus of customers to community banks and credit unions remains to be seen, but there will be a considerable number of fee refugees. So, a second debate now rages on the potential profitability of these customers. As these customers are onboarded, these institutions have an opportunity to put them in a checking/relationship product that both fits customer needs and encourages desirable use of self-service channels, minimizing expense.

Adding a substantial number of potentially unprofitable relationships is a risk, but perhaps this is an opportunity for institutions interested in retail growth to take a look at their front and back-office technology, process, and organizations to ensure they are running as efficiently as possible, allowing additional growth without a comparable increase in staff, improving both service levels and the profitability of all relationships.

Free checking, free debit card, etc. isn’t a God-given or government-given right (yet). I’m just trying to get my head around the question of whether the industry has done everything it can to try and serve these smaller relationships profitability. So, are these fee moves clever, clueless, or did large banks just give up because that’s the perceived easy, quick-fix answer?