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Bryan Yurcan
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The New Bank Fee Model?

Deloitte reports that there is growing consumer sentiment for a pay-by-transaction plan when it comes to bank fees.

Results from a survey released today by the Deloitte Center for Financial Services found that there is increasing desire on the part of bank customers for a pay-by-transaction model for bank services as opposed to the traditional flat-monthly-fee models that many banks currently utilize.

The survey polled 4,271 U.S. consumers in August and was conducted online by Harris Interactive on behalf of Deloitte. Forty-eight percent of those polled indicated a preference for paying a set fee of 25 to 75 cents for each transaction, which was more than double the second-place option, a fixed monthly fee set between $15 and $30, according to the survey. Four other potential pricing models drew between 5 and 12 percent of consumers’ interest.

Deloitte termed this result "surprising," but I think it's actually to be expected. We live in an age where consumers are used to such a range of pricing options and -- in most industries -- where there are an abundance of companies trying to sell us the same service. The idea of paying à la carte for services is appealing to many consumers; it reminds me of the longstanding complaint people have had about cable companies: Why should I pay a flat rate for x amount of channels -- half of which I don't use -- instead of just paying for the ones I do watch?

According to Deloitte, this model could also help banks win the PR war regarding fee increases. The survey found that 22 percent say that a $5 fee increase would "definitely" cause them to switch banks, and another 36 percent said that such a move would "probably" cause them to do the same. Of those on the fence, even more might switch in response to a $10 fee increase, Deloitte reports.

Those polled also were mostly open to a variety of options when asked to rate the appeal of a range of new pricing and service models in exchange for reduced fees, said Deloitte. For example, 40 percent expressed interest in a digital banking plan that would offer reduced fees while providing a limited level of in-person services, suggesting a significant appetite for primarily electronic account services. There were also some notable differences across age groups -- for example, high balance requirements were relatively more popular among older respondents, and a discount for favorable social media activity was the most popular option among the youngest respondents.

Ultimately, consumers want to feel like their bank is being fair to them. Who knows, maybe many bank customers would pay more each month using the à la carte model. But they might not care as much because they would feel like they are paying for services they are using, as opposed to having a blanket fee imposed on them.

But regardless of which which pricing option people prefer, Deloitte says it is important for banks to know their customer well and tailor products and services to each customer accordingly.

“The more important piece for retail banks is going to be communication and transparency,” said Jim Eckenrode, the executive director of the Deloitte Center for Financial Services. "The lack of easy demographic identifiers for pricing preferences means that banks’ insight into their customers will be key, and re-working pricing models will require engagement across multiple dimensions. The aim, of course, should be to build loyalty and satisfaction through better-tailored, high-quality services and offerings, the combination of which can help to drive customers’ willingness to pay for products and services. After these steps, banks will likely receive ‘permission’ from their customers to make significant changes to their pricing policy."

[Related: Six Technologies That Are Transforming Customer Service and Banking Relationships]

Bryan Yurcan is associate editor for Bank Systems and Technology. He has worked in various editorial capacities for newspapers and magazines for the past 8 years. After beginning his career as a municipal and courts reporter for daily newspapers in upstate New York, Bryan has ... View Full Bio

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Cara Latham
Cara Latham,
User Rank: Apprentice
2/7/2013 | 10:07:45 PM
re: The New Bank Fee Model?
I agree with Greg. I use my card for nearly everything. I hardly ever use cash (sorry to anyone who ever asks to borrow a dollar for the snack machine!). PAYG would kill my wallet, and in this case, I'd rather pay a flat monthly fee. At the same time, I can understand the reasoning, especially when likened to the cable dilemma of paying more for channels you don't watch just to have the option of watching the few you actually do.
Greg MacSweeney
Greg MacSweeney,
User Rank: Author
2/7/2013 | 9:49:15 PM
re: The New Bank Fee Model?
Pay as you go? I guess if you have a very low volume of transactions, it makes sense. But if you use your debit card frequently and have a lot of automatic ETFs pinging your account for things like utility payments, the PAYG option doesn't look very attractive.
User Rank: Author
2/7/2013 | 9:18:42 PM
re: The New Bank Fee Model?
I wonder if this pay as you go model is particularly popular with younger customers.- If so, could be a good way to attract younger customers.
User Rank: Apprentice
2/7/2013 | 5:38:18 PM
re: The New Bank Fee Model?
I would be very careful here. Consumers are both used to getting basic services for free (and know that advertizing comes with the service), and that when they do something "special," they pay a small fee.- I think that Jim Eckenrode summed it up very nicely and Bankers would do well to take his comments to heart, before they think this study gives them permission to increase fees.
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