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Banks trying to move from fees to profit
A Bank of America ATM branch in New York City
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Kai Ryssdal: So as I said B of A lost $7.3 billion in the third quarter. Most of that came from a write-down on the value of its credit card unit. Banks just aren't going to be able to make as much off consumer plastic in wake of the new financial regulations. So B of A says says it's going to work on bringing in more retail business instead of charging big fees to existing customers.
We asked Marketplace's Alisa Roth to explain how banks are going to make money in a post-overdraft-charge world.
Alisa Roth: There will still be overdraft charges. They just won't be as lucrative as they used to be.
Aaron Fine works in the retail banking practice at Oliver Wyman, the consulting firm. He says post-financial regulation, there are a couple of ways banks can make up for the lost revenue.
Aaron Fine: They can convince customers to pay different kinds of fees, they can gather more relationships, or they can reduce the costs.
Banks are just starting to figure out what their new business models will look like. The trick is to find products and services that customers actually want. Retail banking isn't about having lots of branches anymore.
Fine: I think one of the ideas that people are clearly exploring is what is convenience related to the new way that consumers access and spend their cash? A lot of that has to do with obviously electronic payments.
Banks are experimenting with letting customers make deposits from their cell phones, and offering online tools to help them manage their money better.
Jim Reichbach looks at financial institutions for Deloitte. He says the key is going to be all about building broader relationships, trying to convince us to have our checking and savings accounts, credit cards and mortgages all from one place.
Jim Reichbach: They're going to be much more aggressive and reward customers for doing that full set of service. It's by having a more holistic relationship with people like you and I and others where they're providing all our services. So they know us better and they can offer better pricing for that bundled package.
He says that could mean that customers with a checking account get a better rate on a credit card or easier access to credit.
Bank of America says it's started offering new products already: better rates to customers who do most of their banking online or at ATMs. And it'll start testing more perks soon as it tries to reuild its customers' trust and generate new business.
In New York, I'm Alisa Roth for Marketplace.
No one can really complain about someone getting charged a fee for truly over drafting their account. But when banks hold your deposit until all the debits are processed or other dubious means to CREATE an overdraft fee, then people get upset and ask for government to make more laws. Whether you call it lost revenue or stopping fraud depends on whether you are on the side of those who feel the banks and institutions should be privileged to help themselves to your money or whether they should earn it.
I wanted to ask about this phrasing: "there are a couple of ways banks can make up for the lost revenue." Sure, technically, one could call it "lost revenue" if you're speaking from the point of view of banks, but that's not really Marketplace's position, correct? Just to balance out the consumer end, what if we started calling it "ill-gotten revenue" or "ethically dubious fees" as many consumers view it? Then the same phrase and point of view sounds kind of... bad: "there are a couple of ways banks can make up for the inability to charge ethically dubious fees".
