Consumers are looking for convenience, especially with the aid of online resources, and banks now have a new opportunity to cash in. A new category of "lifestyle financial services" has been emerging in recent years and these services not only offer greater convenience and convenient transactions for consumers, but also open up new opportunities for additional fee income for banks and credit unions. According to Market Rates Insight's latest study, consumers not only want these new lifestyle financial services, they are willing to pay their bank or credit union for providing them.
These emerging services have evolved over the last two decades due to both changes in personal lifestyle and advances in technology. Some of them have evolved due to demand for increased mobility, better time efficiency, digital identity management and more media connectivity. As new technologies have emerged to make banking easier, consumers are demanding more from their banks, thus redefining the role financial institutions will play in the future.
Of course, banks and credit unions will continue to be a resource for funding and savings for individuals, families and business, but an auxiliary role is emerging for financial institutions to provide additional services, and those services will become the deciding factor when consumers choose where to put their money.
In the past consumers have viewed basics such as free checking accounts as things to which they are entitled, and have understandably been resistant to paying increased fees for these "grandfathered" services.
However, MRI's new study on service fees reveals consumers view lifestyle financial services as enhancements and are willing to pay for the convenience and efficiency they provide. The study found 67% of consumers are likely to use services like credit score reporting, identity theft alerts, mobile deposit, person-to-person payments, personalized couponing, overdraft transfers and prepaid reloadable cards if those services are offered by their financial institution. And, while consumers are resistant to paying for services such as maintenance fees on checking accounts, they are more than willing to pay an average fee of $3.63 per month for each of these financial lifestyle services.
Based on the findings from the service fees study, there are two major reasons why financial institutions need to adapt to provide these new kinds of services to consumers. First is the sharp decline in fees paid for traditional financial services as a result of both regulatory and behavioral changes. The amount of non-interest income generated by U.S. banks on fees from deposit accounts declined from $36.2 billion in January 2011 to $34.1 billion by the end of the year – a drop of $2.1 billion or 5.8%. This is part of a trend that started five years ago; income from service fees on deposit accounts fell from $39.2 billion in December of 2007 to $34.1 billion by December of 2011, a fall of $5.1 billion or 13%. This trend is not likely to change in the near future.
Second, banks and credit unions need to consider how these new services affect customers and members. These lifestyle services are having a profound impact on consumers' lives, which means access to these offerings is becoming a deciding factor when choosing a bank or credit union. The more demand for these services grows and they become a part of everyday life, the more weight they will have with consumers when picking a financial institution for their lending or saving needs.
Nearly seven in 10 consumers have made it clear that they want these new services and are willing to pay for them. The path toward new profits can't be marked any more clearly than that.