If only Southwest Airlines was a bank…

October 7, 2011

The debit card as a substitute for cash movement is about to hit bump in the road. The biggest banks in the nation will soon begin to charge a monthly fee to folks who shop via debit card.

The debit card as a substitute for cash movement is about to hit bump in the road. The biggest banks in the nation will soon begin to charge a monthly fee to folks who shop via debit card. What has grown as a free convenience will now become a value-added service. Regulatory changes have apparently made it harder for the banks to meet their numbers. Consumers have now seen fees for things like "paper statements" and other heretofore standard features. Now, after a push to make debit transactions easier and more convenient for consumers, the free ride is over. Online banking may be next.

Any cries of woe from the banks need to be looked at with some serious skepticism. Banks charge the merchants fees for the debit transactions themselves — they’re really just crying over some regulations that cap these fees. Plus, many online transactions allow the bank to pull money from your account 5 days before the bill is actually paid. With millions of dollars in limbo on a daily basis there is plenty of money made (or interest saved) in the float. On top of all of this, banks save millions of dollars a day from both online banking and debit cards when compared to processing check payments.

An Op-Ed in today’s New York Times by Lloyd Constantine offers some excellent context for the issue.

So, industry norms are changing. And a large (and very public) disgruntled consumer outcry has emerged. For the smart banks out there, this sounds like an opportunity to make your brand stand out with some counter-market behavior.

Think about how Southwest has responded to changes across the airline market by turning free baggage into a benefit, underscoring its promise of value and service. Or how Hyundai has offered a game-changing 10-year warranty to reflect its promise of performance, quality and value.

There is a prevalent distrust of banks in the market. Switching costs (in the form of hassle) involved with direct deposit, online banking, automated bill pay, make people’s everyday lives more intertwined with their banks than ever before. This puts many consumers in an uncomfortable position with their banks. Consumers should, in fact, feel the exact opposite when engaged with a service so intimately connected to their lives.

Plenty of banks talk a good game about being consumer-friendly:

Wells Fargo: Together we’ll go far.
Citizens Bank: Good banking is good citizenship.
PNC: Strong. Deep. Focused on you.
SunTrust: Live Solid. Bank Solid.
Bank of America: Bank of opportunity.

It would be nice to see this group truly put their money where their mouths are by thinking about their customers (not just their investors).

B of A secured first mover as villain in this discussion. Who’s going to be the hero? Free debit cards. Free online banking. There's a promise (or two) that will help to restore some trust when everyone else is perceived as gauging for any fee they can get.

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