In the last few days numerous financial institutions have backpedaled on their plans to implement fees for debit card usage. The general consensus since then is that banks will find other ways to levy fees with varying levels of transparency. In my first fee-related article last week, I questioned whether we’ve done all we can as an industry to avoid “feeing up”. I was joking about potential new sources of fee-based revenue in my Bank Stanky Raises Fees follow-up, but was serious in the latter half of the article about some alternatives presented to alleviate the need for additional fees.

One of the options I suggested in the follow-up article was a freemium model for delivery channels.

There’s something to be said for the freemium model when it comes to web and mobile applications. You can pay up for premium features and avoid advertising, or you can get many of the benefits of the premium version with a free, ad-supported version. Maybe it’s time for sponsored Internet and Mobile banking for customers that might otherwise be subject to fees. If a bank’s determined a customer is unlikely to buy an additional product, why not use the screen real estate to promote a third party product that’s of likely interest to the customer and take in some advertising revenue?

Think about it. You might not want to pay full price for Angry Birds, but you value the product so you don’t find the ad in the upper right corner to be too offensive (now the popup videos are a different story, but you get the idea…)

Banks and credit unions are running propensity-to-buy models that are good enough to understand whether or not customers are likely to buy another product. If there’s not another bank product on the horizon in the near future for the customer, why not promote another non-bank product that’s relevant instead? For non-premium (think unprofitable or marginally profitable) customer segments, this additional revenue could offset the potential need for fees to make the customer relationship profitable. Premium customers wouldn’t see the non-bank offers, instead seeing the bank cross-sell or informational banners as they do today.

I see several benefits to this kind of approach:

  • Customers understand why free websites and apps are ad-supported today, so this model is familar to them already (unlike, say, a $X/month debit card fee)
  • Merchant reward offers are presented by some institutions today and experience indicates customers will respond to relevant offers
  • Customers that would otherwise be subject to additional fees get the benefit of lower-cost banking services
  • Customers may benefit from an offer of a relevant product or service (I said relevant and presented relatively unobtrusively)
  • Banks get the benefit of additional income from advertisers

Am I off base in thinking this kind of model could be part of the answer?