A key consideration seems to be missing from the discussion of Bank of America's decision to stop authorizing purchases on debit cards that trigger overdraft fees.
I agree that this move will help to strengthen B of A's trust factor with its clients and that this, in the long run, will prove to be a good thing for the bank. But the bank stands to benefit more immediately from this move: customers will have to choose from a smaller set of product options that are all easier to understand than the complex overdraft opt-in option. B of A is demonstrating that it understands what customers really want from banks and delivering on this should drive sales of new fee-based services at the bank.
B of A can now market alternatives for customers that will actually benefit them relative to overdrafts: monthly fee-based accounts, automated transfers for a nominal fee, or even a credit line - including a B of A credit card that could immediately be pulled out of a wallet at the point-of-sale when the debit transaction is denied. The bank is surely savvy enough to segment its customer base relative to these simple replacement options to ensure recoupment of lost revenue over time.
It's surprising that so many bankers seem to regard this move by B of A as something that will be viewed negatively by the bank's customers. The people have spoken: they don't like to spend money they don't have and they don't like surprise fees. This move by B of A responds well to customer sentiment, but it also enables the bank to simplify the options for its customers and make pricing more transparent - which suggests the bank also understands customer behavior and what motivates it.
Mary Beth Sullivan
Capital Performance Group LLC
Editor's note: Capital Performance Group is a management consulting firm specializing in financial services.