LAS VEGAS–Bank of America Corp. believed customers would appreciate the simplicity and “transparency” of its move to introduce a $5 monthly debit fee in the same way they responded to its sweeping decision last year to eliminate debit-overdraft protection, a BofA executive told attendees today at the ATM, Debit & Prepaid Forum.
The plan backfired, sparking extreme negative feedback from customers. And that prompted BofA on Nov. 1 to withdraw the fee, said Laurie Readhead, BofA retail banking executive said (
But the bank’s decision to be upfront about its fee and alert customers well in advance was “very intentional” and is part of its ongoing strategy to test products and modify them based on customer response, Readhead said.
“We based our decision to eliminate debit-overdraft protection on what customers were telling us, and in this case we were also open to customer feedback when we eliminated the debit fee, which is part of our commitment to being completely clear and responsive,” Readhead told PaymentsSource in an interview.
BofA has “a lot to learn when changing pricing” of products, but the bank plans to continue emphasizing simplicity, clarity and transparency as it reshapes its banking products and national branch network to balance profitability with customer needs, Readhead told attendees.
The Charlotte, N.C.-based bank since January has been testing a package of different bank-services options in Arizona, Georgia and Massachusetts that it plans to roll out nationally next year after gathering feedback through focus groups and other channels to refine the prices and features, Readhead said.
The new pricing strategy is closely tied to BofA’s efforts to close and consolidate services at its 5,000 branches and outlets as it strives to find the right combination of self-service and customer contact in various regions and demographic categories.
The pilot being conducted in those three states offers a flat-fee option with checking and branch-based services and statements; a no-fee option offering electronic banking services only; an “enhanced” option with no fee plus rewards for those who expand their relationship to include credit cards, mortgages and investment services; and a “premium” option for those with larger combined balances that includes priority in receiving customer service and other rewards, Readhead said.
The notion of consolidating balances with BofA to receive enhanced rewards “resonates” with consumers, she said.
But merely repricing banking products is not a complete solution for finding profitability as the economy and the effects of new regulations cut into revenues, Readhead said.
“You have to look at lowering expenses,” she said, noting BofA plans to continue closing branches. “We want to (close branches) in the right way for the customer and the banking center.”
Customers have adopted self-service banking channels within the past five years, Readhead said, noting BofA has 29 million active online-banking customers, 15 million of whom routinely pay bills online.
“(But) some customers still want to go to a banking center and talk to somebody, despite the fact that they might be fully banking (online),” Readhead said. “You’ll start to see (a mix) of banking centers.”
Some centers will provide more basic banking services, and “some will have personal bankers, all the way up to mortgage bankers, small-business bankers and investment advisors,” she said.
Finding the right blend of customer contact plus self-service banking is a tricky proposition at a time when banks must cut overhead to remain profitable, Readhead said.
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