While First Chicago Corp. backpedaled on its plan to charge $3 for some teller transactions, the desire of many banks to boost profitability and migrate customers to automated teller machines and telephone banking has not gone away.
Banks are facing two challenges: one related to image and the other to technology.
After First Chicago's announcement, the bank had a public relations nightmare, what with a congresswoman calling for a boycott and Jay Leno cracking jokes on late-night television. The bank later reduced minimum balances and increased the amount of teller transactions permitted before the fee kicks in.
Of course, the Chicago bank was hardly alone in trying to influence customer behavior by levying fees - it's an increasingly common practice.
But when such moves capture the attention of the press, even the most reasonable explanation - that the fees affect only customers who are heavy users of branches - can ring hollow.
Take, for example, the comment by a spokesman when Bank South Corp. said it would charge customers $1 when they submit handwritten deposit slips instead of pre-encoded forms sent to them in the mail. "This is not about collecting fees. This is about reducing errors, highlighing alternative methods, and increasing customer service," the spokesman said.
Try telling that to the customer who forgot his deposit slip.
Then there's the technological challenge. Only half of banks say they now have systems in place to track customer profitability, the American Banker/Tower Group survey of technology in banking found. Another 19% said such systems were in development. The rest said the ability to track customer profitability remains a high priority for the future.
What's more, the tremendous increases in ATM and telephone banking racked up in recent years have changed the dynamic of tracking profitability. First Interstate Bancorp, for example, has long had a model to gauge customer profitability. But it's now deciding on an approach to find how actual customer transaction behavior affects profitability.
"If the industry, or any particular player, sets the goal of making 90% of their households profitable, they find there is no way you can afford the current level of branch costs and deliver on (that) objective. No way," said James McCormick, president of First Manhattan Consulting Group in New York. "Because most customers will not pay what it costs to give them the branch distribution service they are now receiving."
