Actionable Insights From APT's Financial Services Practice

Banks Charge for Branching Out

November 25th, 2013 | Posted by JDouglass in Financial Services | Financial Services

In the constant struggle to figure out how to successfully charge fees, some banks are now charging customers for using the branch. A recent article by CNBC cited multiple cases in which banks are introducing accounts for customers who plan to bank mostly through online, mobile, and ATM channels. However, if the customer wishes to bank in the branch, he may face a sizable fee: $8.95/month in the case of Bank of America’s “eBanking” account mentioned in the article.

As we’ve seen with many other banking fee innovations, charging for branch services bears risk. Bank of America recently folded their eBanking account offering after three years, a spokesperson acknowledging that “Customers want full service banking, even if they only visit a teller infrequently.” This action further underscores a trend that we’ve seen before:  fees will likely be much less successful if they are tacked onto a product or service that customers are accustomed to receiving for free. In many cases, it may simply be too difficult to get around the customer’s disposition against fees for products/services that were historically free.  Alternatively, banks may be more successful in charging fees for new or expedited services, such as fraud monitoring and faster mobile check deposit availability.

So how can banks determine which fees are profitable? Neil Weinberg, editor of American Banker suggested, “What is a premium service that they’re willing to see fees from? That’s the experimentation.” Experimentation is indeed the way APT has helped many banks understand the profitability of new fees. Banks should test new fees in a few markets or branches to measure the impact on key performance metrics and decide whether broader rollout is warranted. Click here to read more about APT’s work analyzing in-market tests at leading financial institutions.

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