Banks Make It Clear: We’re Sticking It To You With Fees

An article in highlighted the fact that many big banks still don’t understand what customer experience is or why it’s the biggest single driver of business success for most companies.  

Apparently Citigroup is about to join a “growing number of banks and credit unions” that have adopted some version of a one-page disclosure form. That form makes it easier for customers to see and understand fees.

Now don’t get me wrong: Making it easier to understand fees is a step forward. After all, ease of doing business is the second level of the customer experience pyramid and only slightly less important than meeting customer needs.

What has me shaking my head is the next part of the article. It says that these new summary pages come in response to complaints about rising fees, including fees that few customers knew about in the first place, like a fee for getting a paper statement and — my personal favorite — a fee for closing an account.   

A fee for closing an account? Really? I may be old-fashioned, but I’m used to paying people to perform a service for me, not paying them to stop performing a service for me.

Here’s why the whole “fee transparency” thing misses the point: Your bank really, really wants you to open more fee-generating accounts with it. When you add a savings account or CD to your checking account, or take out an auto loan or a home equity loan, you ring its cash register.

Do nuisance fees make you want to open more accounts with your bank? I think not. Do they make you want to keep the accounts you already have instead of moving business to one of your bank’s competitors? No. And as I pointed out in an earlier post, it’s far easier than ever to shift business to a growing number of big bank competitors.

How could banks get you to open more accounts? They could find ways to: better meet your needs, make it easier for you to conduct business with them (and not just by supplying a fee summary that puts a bandage on their 97-plus-page fee disclosure forms), and make it more enjoyable for you to do business with them.


Unfortunately the big banks

Unfortunately the big banks have bought into the "too big to fail" mentality. They believe that the number of defiant consumers who would close their accounts will not even make a small dent in their banks' bottom lines. And we can't count on the politicians who accepted almost $17 million in political contributions ( from banks to really fix it.

It's a lot easier to make a profit charging nuisance fees than it would be to pay for the real expense of customer service training in hopes of an ROI. So we shouldn't expect banks to change from their present practice of finding ways to "nickel and dime" consumers.

And here is the problem. The battle cry should be: "Harley's absolutely right! We need a customer revolution. We need strong consumer activism to drive change." Why we're stymied: Too many of us are saying, "We need change! You go first."

Not sure what we can about it. But I'd be willing to do whatever it takes. You go first.

Unfortunately, the banking

Unfortunately, the banking industry is so over-regulated, that fees are a natural occurrence. I know, I'm a compliance professional. Banks have to cover their cost of funds, their overhead, and turn a profit, and the government has placed so many restrictions on how banks can do this that fees are the resulting balancing device. For instance, the recent regulations by the Fed on interchange has reduced the income a bank can earn on debit interchange. Naturally, they can't provide a service for free, so now you see banks dropping free checking, and charging fees to cover the costs of operating these accounts.
I should point out that I'm writing this from the perspective of a small community credit union that still doesn't charge these fees; however, we find our organization being jammed into the same "evil bankers" box that politicians love to tout, and it jeopardizes the personal friendly service philosophy we have by limiting our ability to innovate. It also leaves the public completely ignorant about the reality of the banking system by making people think that it's the evil bankers trying to gouge them at every turn. Try operating a bank for free and see if it survives. Fees are not evil, the banks charging them are not evil, it is the stupid laws that cause banks to have to charge dumb fees to stay in operation and remain profitable that are evil. Place the blame where the blame is due. And, if you think that customer's can simply vote with their feet right now, think again, the next bank you run to will have the same fees because they must charge them in order to remain profitable. Besides, is it really bad for banks to want to make a profit? Why do we as consumers think that the banking industry shouldn't make any money? Do you feel the same way about the business you are in? Probably not.
Now don't get me wrong, there are plenty of banks making stupid decisions and inventing all kinds of unfriendly fees. But let's tone it down a bit and realize that we are talking about one of the most highly regulated industries today. Banks have to get creative, that's all there is too it.

I appreciate and do

I appreciate and do acknowledge your insight as a specialist within the industry. From an alternative view, when I was a customer service speaker, I'd tell the audience that in wanting to deliver an exceptional customer experience, the first principle is "Be the Customer." In "being the customer", the mantra is "the customer is paying for his experience, not ours." For example, if you went to a restaurant for dinner, you don't care that one of the cooks called in sick, the truck didn't deliver the raw products or the server is overwhelmed. That's the restaurant's experience. You, as customer, are only interested in your own dining experience. And if you're going to pay at the end of that experience, you don't want to be dissatisfied. In turn for us, as bank customers, we don't know or frankly care about banking regulations. That's the banker's experience. Our experience: Why are we are charged fees for giving banks OUR money for banks to loan it to other people, earning a profit by charging them for that loan. Simplistic, but that's how we feel.

I'd tell the audience, "Image is everything, feels are facts, perception is reality." You can argue the facts with customers, but you can't change how they FEEL about something. Also, we, as customers, don't know what we don't know. What we do know is that, not too long ago, we didn't have to pay for bringing luggage on airplanes. Not too long ago, someone would come out and check our oil, clean our windshield and pump our gas for us. Now for a lot more than we used to pay for a gallon of gas, we PUMP IT OURSELVES. Our perception is that service has deteriorated, yet we are paying more for what we used to get and, in the case of luggage or checking, what we used to get for free.

When I was a general manager of a full-service hotel, the #1 customer complaint was why did we charge a WI-FI fee when select service hotels did not. They didn't care that select services were much smaller, needing much less equipment to send the signal through their rooms. It didn't matter that the infrastructure costs to equip every room with a strong WI-FI signal to accommodate guests downloading Netflix was budget-breaking expensive. That was our problem. If it was free at the Courtyard down the street sp it should be free with us.

With that mindset, customers lump the banking industry as a whole with the likes of JP Morgan Chase. JP announced posting a FIRST quarter 2012 net income of $5.4 billion, only 6% better than last year same quarter, a reasonable profit for any business. But it was BILLIONS. And when you see that in 2011, first quarter profits were up 67%, then you question how much profit is enough. Coupled with the $2 billion dollar loss that JPMorgan announced, customers question if these fees are to cover such mistakes. I understand that such lumping banking, especially credit unions, with JPMorgan is not realistic. I understand that JPMorgan's profit was not just from Chase banks. I also understand that not all banks are that profitable, but again, perception is reality and that's how we, as customers, feel. We think that banks could skip charging us the fees since they are more profitable than most other businesses in a very, very down economy. As you pointed out, that may not be true, but it is our reality.

Going back full circle to Harley Manning's contention that banks could focus on service, when I spoke to financial institutions, I quoted Stanley Marcus, “The dollar bills the customer gets from the tellers in four banks are the same. What is different are the tellers.” What can financial institutions, specifically the customer contact people, do to differentiate themselves to drive customer loyalty and referrals? As you know firsthand, credit unions are doing a better job at that than the big bank branches. From the general audience feedback I got, credit unions are seen as much more neighborly and personal. In fact, they are exempt from the negative perception attributed to the big banks like Chase and Bank of America.

Again, D Wade, I certainly appreciate your insight. It enlightened me from a different perspective.