I was both encouraged and perplexed by an article in The Wall Street Journal that described the internal debate at Bank of America over how to grow revenue. One side of the debate wants to charge new fees for basic services like checking accounts. And who do they want to charge? Their unprofitable customers who “typically have less than $50,000 in annual household income.” Those customers do little business with the bank, and Bank of America reportedly loses a couple of hundred dollars a year on them.
The other side of the debate wants to raise revenues by getting these unprofitable customers to buy more financial products from the bank — for example, get a credit card or buy a CD or take out a mortgage. If that happened, the problematic customers would generate enough revenue to become a money-making proposition for Bank of America.
If I were picking the winner of this debate, the decision would be easy. A growth plan that depends on extracting ever-increasing fee revenue from the very people who can least afford to pay it – for services that were formerly free – doesn’t seem like a growth plan at all. But getting a bigger share of those same customers’ wallets by selling them products that they’re going to buy from someone is a strategy that’s already working today for a bank that I’ll talk about in a minute.
The real question in this debate should be, how can Bank of America get its unprofitable customers to do more business with it? The answer: Provide a vastly improved customer experience — toe-dipping will not get the job done.