By: Joe Gillen
Most consumers understand that fee income is a strong source of revenue for banks and credit unions. However, when it comes to how fees are assessed,�the large majority say that they disapprove of existing banking models and would prefer a structure that imposes fees based on transaction volume.
According to a new survey conducted by the Deloitte Center for Financial Services, 48 percent of respondents said they prefer a pay-by-transaction fee banking model, rather than the flat-fee model that is currently in place. Nearly half said they would be satisfied paying between 25 and 75 cents per banking transaction, compared to monthly fees that can range anywhere from $15 to $30 per month for services rendered. Respondents noted that a fee-by-transaction model would serve to increase banking transparency and help avoid confusion and frustration over superfluous and surprise fees.
A number of respondents said they believe some banks unfairly increase fees for existing services, and 22 percent said a $5 fee hike would definitely prompt them to switch banks. Another 36 percent said a price increase of this amount might be enough to persuade them to venture to a new bank. These figures denote Americans' strong dislike for fees that they deem excessive or unfair.�
"Retail banks' free checking model has been withering away since 2009, and margins continue to erode," said Jim Eckenrode, executive director of the Deloitte Center for Financial Services. "The basic economics of retail banking are under substantial pressure, given reduced non-interest income from traditional sources like debit interchange and overdraft fees. The question now becomes how banks move away from the free model, which a number of other industries have struggled with and often to the detriment of customer relationships."
Banks, credit unions should propose mobile and online banking as strategy to avoid fees
In many cases, the fees levied on consumers result from transactions that could have been avoided or modified if consumers had accessed online or mobile banking channels beforehand. For example, customers who accessed their account balances via their smartphones may have avoided overdraft fees by transferring funds on their phones or avoiding purchases altogether. The same is true for individuals who must maintain a certain balance to avoid a fee. Mobile devices can also also be used to help customers locate network ATMs to avoid being charged by an out-of-network kiosk. Highlighting the benefits of mobile and online banking may not only encourage increased usage, but also help customers remain satisfied by preventing avoidable fees and charges.
�