After Bank of America announced in September it was instituting a $5 monthly fee on debit card transactions, the uproar was deafening.
Consumer advocate groups, politicians and enraged patrons kept the headlines buzzing for days. Protesters at the then-highly visible Occupy Wall Street movement made the fee a cause célèbre. Even President Obama criticized the corporate decision in a televised interview, telling ABC News the bank charge was exactly the sort of stuff that folks are frustrated by.
It turns out, that was only the beginning.
Facing both a slew of regulatory developments and volatile capital markets, banks are seeing parts of their traditional revenue model threatened.
Banks are saying, 'We're making hundreds of millions of dollars (on fees), but we used to make billions, said Alex Matjanec, co-founder of MyBankTracker.com, which provides consumers with information about banking options.
One solution: charge customers more fees, either by raising existing fees, charging for services that used to be free or offering new services at a cost.
Big banks are raising fees, inventing new fees and making it harder to avoid fees, said Ed Mierzwinski, consumer program director at U.S. Public Interest Research Group, an organization that lobbies for consumer protection at the national level.
Mierzwinski, as well as several other experts, say 2012 will see banks attempt to place higher fees or new fees on retail consumers. Some possibilities include:
- Continuing hikes in the amount banks charge to let people use their ATMs with another bank's card. ATM fees continue to march higher, year in, year out, says Greg McBride, senior financial analyst at Bankrate.com, another Web site set up to help consumers make banking decisions.
- Percentage-based fees for ATM withdrawals. Matjanec points to an example of an ATM that charges customers 3 percent on the total amount of cash withdrawn -- or $6 on a $200 withdrawal -- and notes such fee schemes could become more common.
- Increased minimum balance requirements instituted to avoid fees. McBride calls this the backdoor way of putting a fee increase, since consumers who did not have to worry about paying a fee before will now be subject to one.
- Elimination of debit card rewards program, including through tweaking the value of points.
- Moving consumers from interest-bearing checking accounts towards non-interest bearing accounts, which McBride sees as a possibility in certain credit unions that offer such option.
- Higher fees for relatively less-common transactions currently free at most banks, such as receiving copies of cancelled checks as part of a statement or replacing lost debit cards.
- Fees for speaking to a person rather than manuevering through the prompts of an automated customer service system, what Mierzwinski describes as a charge for calling to a human instead of a machine.
- A rise in overdraft protection fees, perhaps by instituting a system where the customer pays a monthly fee for a certain level of protection, rather than a per-item fee every time overdraft protection is triggered.
- Fees for relatively novel offerings, like the ability to deposit a check using a smartphone or being able to review certain transactions before they clear.
- Small fees, in the order of $1 to $2 a month, for specialized Web-based services, such as being able to instant message a service representative, or personalize what each user accessing a joint account sees. Matjanec, who believes this is the direction many new fees will take, says bank see these new services as making a foundation for new fees.
The Telecom Model
While the experts all agreed new fees are on the way, they disagreed markedly as to the way new fees will affect customers.
Matjanec, for example, believes banks will work to place customers with different levels of engagement in different buckets, working to introduce a new form of banking where relationships really matter. McBride agrees, noting the fee that one guy pay isn't necessarily the fee the other guy pays.
But their agreement does not extend to how exactly that will happen.
Matjanec believes banks are going to take the mobile telephone bill experience -- the data plan model where customers choose from a menu of services on a monthly basis. Similarly, Mierzwinski says checking accounts are likely to become an a la carte product: the same way you see in airlines where they charge you for checked bags, or having a better seat, or pretty much anything but riding on the wing.
McBride, on the other hand, says banks will avoid that model, since people don't want to feel like they're on Spirit Airlines, that they have to pay every time they put a bag on an overhead bin, or to get a drink of water.
There's also the possibility consumers will change the banking experience themselves, by voting with their feet. While big banks are committed to get away from this idea that everything is free, McBride said, now that the big banks have jumped off the free checking bandwagon, I think again consumers are again starting to see the differential between large banks and smaller banks and credit unions.
A final possibility: More oversight from Washington as a result of consumer anger over banks' introducing new retail fees.
Interest-bearing deposits at Bank of America's U.S. offices fell a staggering 10.7 percent during the quarter after the debit-card fee was announced, to $624.8 billion from $629.2 billion. During roughly that same period independent research firm Javelin Strategy and Research estimates 5.6 million U.S. adults switched banking providers. A Javelin survey found that 26 percent of those switching cited too many fees as the reason.
Federal regulators, like the newly created Consumer Financial Protection Bureau, could also play a role. Overdraft protection program fees, for example, could be a target.
Mierzwinski says he'd be shocked if the CFPB doesn't roll back consumer participation in opt-in overdraft protection programs -- overdraft protection services must be explicitly agreed to by consumers -- perhaps by requiring clearer disclosure of the particular fees attached to those services or regulating their marketing.
It's astonishing that more than half of consumers would opt in to a bad program unless they were deceived, Mierzwinski said. There is no way people would have opted in if they understood that program.