CHICAGO — Bank of America Corp.'s decision to charge $5 a month to debit-card users has sparked conversations across the industry around the best way to respond to the banking giant's PR nightmare, and the issue is not just hypothetical — at least one institution is already seeing the effect of B of A's fee in its recruitment efforts.
New member registrations spiked recently at BECU, and "we can thank Bank of America," said Howie Wu, the credit union's vice president of virtual banking. "We have seen an incredible uptick."
Wu was one of many bank and technology executives who discussed the B of A fee at this week's BAI conference.
Wu did not say exactly how many new members were former B of A customers, nor did he say whether the customers expressed a direct anger at B of A when registering with BECU. But the connection was clear.
"The [B of A] announcement came out about 10 or 11 days ago," Wu said. "We normally average growth of about 7,000 new members each month. But I was looking at numbers yesterday and found that for the last ten days we had 5,200 new members."
BECU, formerly Boeing Employees' Credit Union, stresses the importance of integrated self-service branches and online service in registering and serving a fast growing membership base, Wu said. About 12,000 new members signed up online during the past year at BECU, which now has about 9.5 million members that are served by only 40 branches.
Bank of America did not respond to requests for comment on its retention policies. The Charlotte, N.C., bank earlier this month told Reuters that the economics of offering a debit card had changed, leading to its decision to charge for debit transactions. The article said JPMorgan Chase & Co., Wells Fargo & Co. and SunTrust Banks Inc. are also testing or planning monthly debit card fees.
Banks face a problem in how they handle the communication of new fees to customers, said Paul McAdam, Fidelity National Information Services Inc.'s senior vice president of research and thought leadership. He referenced Molly Katchpole, a consumer who has collected more than 220,000 signatures on a petition over Bank of America's $5 debit fee.
McAdam did not address the virtue of the protest, but said it is important to understand consumer needs to gauge customer profitability and forge loyalty-driven retention.
In a slide presentation, Nate Wehunt, senior vice president and digital channels manager for City National Bank of Los Angeles, highlighted a quote from Katchpole's online petition: "[By using the debit card] I'm using my own money, I'm saving money and I'm sick and tired of banks looking for ways to take my money because they can't pay for their own mistakes."
Katchpole's frustration is fueled by banks' own failures in communicating with their customers, Wehunt said.
"We have to help customers understand that providing a financial account is not a free thing to do," Wehunt said. "We do a very poor job of communicating value proposition to our clients."
Communication between technology and business units is also an important part of improving a bank's ability to understand its customers, panelists said. Sales staff must understand a bank's online content to understand customer intent, because most customers do their research on the Web – 77% of customers research bank products online, according to new FIS research.
"Does your sales force understand what's online? I don't know, but I doubt it," Wehunt said.
I was very disappointed to read your recent article "B of A Customers Flee Fee - For a Credit Union". Your flagrant use of the bank is my primary concern. If anything has become clear through 2,300 pages of Dodd/Frank legislation it is that a bright line exits between the greedy, mega sized Wall Street banks and the community banks taking care of Main Street America. You and every other journalist have a journalist obligation, with regard to integrity, to make that distinction clear for your readers. Your story touches on just a portion of the facts, and whether intentional or not, unduly highlights credit unions as the place to be.
During an economic crisis like the one we are currently enduring highlighting credit unions that pay no federal or state income tax as the answer to the problem just doesn't add up. Community banks have long been the cornerstone of small business lending and lending to people of modest means in this country. That hasn't changed, and we also pay taxes. We are helping grow the American economy. And, because we are not transaction focused like Wall Street we aren't abusing our customers with fee-zation strategies, instead we are focused on the customer relationship, their needs and to maintaining a viable business model.