Fee Income Archives - Page 2 of 4

Fees: Regions Adds Time-Based Charge to Remote Deposits

By Jim Bruene Posted on April 11, 2013
Categories: Fee Income, Mobile Banking, Pricing, Remote Deposit Capture

Retail bankers, we’ve had a sighting of that very rare bird, the North American Newfee. It was thought to have gone extinct in the fall of 2011, when anti-bankers shot down the last breeding pair, a malformed $5 debit card fee at Bank of America.

But surprise. Regions Bank has gone out on a limb and put a fee on the newest banking feature to sweep the nation, remote check deposit. And the bank didn’t settle for the standard per-use fee (in trial at U.S. Bank), Regions got creative with a tiered price dependent on how fast you want the money (see note 1 for exact wording):

Immediate >>> 1% to 3% of check amount, with $5 minimum
Same night (8 pm cutoff) >>> $3 per check
Two days >>> $0.50 per check

There is also a potential $1 additional fee to temporarily raise your daily deposit limit to deposit a large check.

My take: I think Regions is smart to add fee(s) for the huge value mobile deposit delivers, though I think it would be better as part of a feature-laden bundle sold on a monthly subscription fee (note 2).

But tiered pricing is a novel idea worth trying. And I like the three options. But its probably too complicated for new users, at least the way it’s presented in Regions FAQ (note 3). Also confusing matters, is the extra buck for checks larger than the user’s limit. It’s asking a lot for customers to decide among three options, especially when having to decipher jargon and timing rules such as "Funds are available during posting."

The multi-choice pricing scheme is an example of the paradox of choice. A theory (and direct marketing rule of thumb) that says you should keep choices to a minimum otherwise recipients become overwhelmed and just give up.

I think the bank would be better off starting with just two tiers, normal and expedited. Then introducing the third tier in v2.0 next year.

But overall, congratulations to Regions for braving the unknown to see if this newfee has wings (note 6).

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Notes:
1. Here’s how the fee is explained in the FAQ:

A somewhat better explanation is included on the mobile banking page:

2. For more info on fee-based banking services, our Online Banking Report on fee-based online services (subscription, May 2011).
3. Hopefully, the choices are better explained within the mobile user interface, which I was unable to see.
4. As expected, the initial reviews from Apple app users are harsh. Currently the bank has just a 1.5 star rating on the new version of the app containing mobile deposit. Down from 2 stars previously.
5. Sorry for the prolonged bird metaphor. Sometimes you get bored at the keyboard (keybored?). It’s also our second bird-themed post on fees. What’s that about?
6. American Banker: http://www.americanbanker.com/issues/178_66/regions-offers-mobile-deposit-for-a-fee-1058090-1.html?

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Launching: MetroMile Launches Mileage-Based Auto Insurance

By Jim Bruene Posted on December 5, 2012
Categories: Fee Income, Insurance, Launches, Personal Financial Management

One of the dumber things I’ve ever done financially is buy an old two-seat convertible on eBay. Who would have guessed that you just don’t get a chance to drive that thing much in Seattle? But next July, when the sun comes out again, I’ll be very happy to have it.

In the meantime, I have this nasty monthly insurance bill. Really, $60 per month to have the car sit idle in my garage? It’s throwing good money after bad. I should call my agent and turn the insurance off. But what if there’s a sun-break this month or our other car is in the shop? Then I’ll need it.

From the insurance company’s perspective, they don’t want me calling to activate/deactivate insurance multiple times per year (though they love my current zero-miles-per-winter full-pay status). The subsequent labor and fulfillment cost would wipe out much, if not all, the profitability on my account.

So, I’m the perfect candidate for pay-as-you-go insurance, and I’m happy to see it launch in Oregon, thanks to MetroMile, a VC-backed Bay Area startup (note 1). Hopefully, it will make it’s way north to Seattle very soon.
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How it works
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MetroMile charges a smaller fixed monthly fee, then adds a variable charge based on the number of miles driven (with a cap at 150 miles in a day).

To calculate the mileage fee users plug a small device called a Metronome into their on-board diagnostic port (note 2). It measures miles traveled and tracks GPS location to create a rich history of your touring (see inset & screenshot 1, note 3).

Oregon residents can get a lightening-fast quote (screenshots 2 to 5) and complete the app online (screenshot 6). The quote on my convertible came was $29/mo plus 2.3 cents per mile (screenshot 4). This would be an amazing deal for me, cutting my insurance costs by 50% annually (note 4). I would save money every month I drove less than 1,300 miles.

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Opportunity for financial institutions
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It’s going to take a massive education process before this new type of insurance becomes popular (assuming state regulators allow it). Show customers that you are innovative and can deliver superior value by introducing them to a financial product that could save them $20 per month for the rest of their lives. And one that delivers a rich history of their car travel (which can eventually be plugged into the bank’s PFM).

You could even package it with other bank products (checking, savings, car loans, etc) to continue to remind customers that you helped save them big time. Even more interesting, would be bundling the insurance with mileage-based auto financing to provide an even bigger incentive to save money by driving fewer miles.

Right now, in the United States, only Oregon FIs could participate (note 5). But as the product spreads nationwide across multiple providers, it could make a nice, profitable product addition to your web and mobile offerings.

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1. MetroMile dashboard showing GPS data compiled from tracking device (5 Dec 2012)

2. MetroMile homepage features 2-minute quote (5 Dec 2012)
Note: Unlike virtually all insurance quote sites, no contact info is required to find the actual price. And you for one car and one driver, you can fill out the form in as little as 60 seconds, my actual time the third time I tried it.

3. Step 1: Enter primary driver info

4. Step 2: Enter vehicle info

5. Step 3: The final price is delivered in the the third-pane of the application

6. Finalize online app with contact info

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Notes:
1. Hat tip to Pando Daily.
2. The port is available on all cars built since 1996.
3. The device could also be used to measure average speed, but GPS data collection is optional and is not currently used by the company.
4. I was comparing my current Seattle price to a Portland quote, so that could be a portion of the difference.
5. We don’t know if MetroMile is will pay for referrals at this time.
6. For more on banks offering insurance, see our full report here (Dec 2011, subscription)

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New Online Banking Report Published: Digital Overdraft Protection

By Jim Bruene Posted on October 30, 2012
Categories: Fee Income, Online Banking Report, Pricing

I’ve been wanting to write about overdraft protection for more than five years. It’s a $30 billion market (note 1) with a number of serious issues, but I wasn’t quite sure how it fit our mission of identifying opportunities in online and mobile banking. I finally realized the always-on digital connection to the customer fundamentally changes the overdraft equation.

In the pre-digital age, a “bad check” was a labor-intensive process. Manually handling the item with slow snail-mail and/or phone calls to the customer was a hassle and a significant cost. The $8 NSF/OD fee in place when I started in banking (late 1980s) barely covered the variable costs, and certainly wasn’t a major profit center.

Fast-forward 25 years. With sophisticated balance forecasting ala Simple (note 3), real-time debit authorizations, and virtually free instant customer communications, not to mention a hostile political environment, the days of $30+ penalty fees are numbered.

The transition will not be an easy one for banks. But there are ways to create customer-friendly overdraft-protection services, primarily delivered digitally, that win back a good portion of the lost revenue while making customers MUCH, MUCH more satisfied.

Our new 36-page report includes:

25 promising overdraft-protection enhancements for the digital age
Pricing overdrafts and overdraft-protection services
Gallery of overdraft-protection websites at banks and credit unions
Profile: Bank of Internet’s OD-free checking account
Size of the U.S. market for overdrafts

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About the report
__________________________________________________________________

Digital Overdraft Protection (link)
Making it a customer benefit again

Author: Jim Bruene, Editor & Founder

Published: 29 October 2012

Length: 36 pages, 12 tables, 7,600 words

Cost: No extra charge to OBR subscribers, US$395 for others here

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Notes:
1. United States fee income to banks and credit unions
2. Graphic from Southwest Missouri Bank
3. For more on balance forecasting, see our recent PFM report (June 2012, subscription).

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Bank of Internet Launches No-Overdraft-Fee Checking Account

By Jim Bruene Posted on September 27, 2012
Categories: Bank of Internet, Deposits, Checking, Savings, CDs, Fee Income, Pricing

I’ve been working on a blog post, “overdrafts in the digital age,” for a few days. But it’s ballooning to the point where I may turn it into a full Online Banking Report. Or just publish it in several parts here.

Either way, I’m looking for examples of new approaches to overdraft protection. For example, Bank of Internet recently did away with the fee altogether on its Rewards Checking account. The bank won’t necessarily honor the check (unless the user is covered by linked-account overdraft protection), but they won’t charge a fee if they give it the heave-ho (note 1).

The account also boasts no monthly fee, an APY up to 1.25% (if electronic transaction minimums are met), an ATM fee rebate, Intuit’s FinanceWorks PFM with Cardlytics-powered cash-back, mobile remote deposit (Mitek-powered, I presume) and Fiserv’s POPmoney P2P payments. It’s like a Finovate greatest-hits account.

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Bank of Internet homepage features Rewards Checking (27 Sep 2012)

Rewards checking landing page (link)

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Note:
1. Bank of Internet won’t impose a fee, but the merchant who submitted the check (and who will be dinged by their bank) very likely will. So it’s not necessarily a fee-free event.
2. For info, our report on fee-based online services (subscription, May 2011)

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Fee-Based Features: Document Registration and Storage Services

By Jim Bruene Posted on July 26, 2012
Categories: Fee Income, Safe Deposit

Consumers hate fees, of course. But that doesn’t stop them from paying $1,000 per year for their iPhones. It’s all about perceived value.

No one will ever confuse a bank with Apple. But there are hundreds of value-added services that financial institutions could offer customers for a fee (note 1).

For example, document registration. There couldn’t be a more mundane service than document registration. Yet, it fills a real need for the constantly unorganized, and their heirs.

Four years ago (see May 2008 post), we wrote about FindYourPolicy.com, a startup that had created a service to help people keep better track of their life insurance and beneficiaries. According to the company $1 billion in insurance policies go unclaimed each year due to unknown or lost beneficiaries. Although it sounds simple, tracking down beneficiaries can be a timely and expensive process. Outsourcing some or all of that is an appealing idea.

In 2008, the company was trying to get consumers to pay $25 to $50/year for the service. We didn’t expect that fee to stick and later that year the company abandoned that model. Now they allow users to register life insurance policies free of charge, then assess heirs $9.95 to search the database for potential policies. It would be a good business if it gained a critical mass of users, but that won’t be easy.

However, life insurance recording would be an excellent value-add for online banking. It’s a bit of a stretch to think you’d be able to get a fee for just that. However, if you expand the service to include more document types such as wills, titles, and contracts, it begins to have more potential for fee income.

But to really bring value to the service, you’ll likely want a storage piece as well. Although Wells Fargo shuttered its vSafe service in March (post), several large credit unions are moving into the storage space, including Northwest Federal Credit Union which is providing its 68,000 e-statement users with 100MB of free storage space powered by DigitalMailer (note 2, 3, 4).

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Northwest FCU showcases its new My Virtual Strongbox storage service in a homepage ad (15 July 2012)

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Notes:
1. For info on fee-based financial services, see the Online Banking Report (subscription) on fee-based online services (May 2011); paperless banking and online storage (late 2010); and lifetime statement archives (2005).
2. We looked at DigitalMailer’s new My Virtual StrongBox in our April report (subscription).
3. Members using e-statements get 100 MB free storage and can pay a fee for additional space.
4. DigitalMailer will be demoing VirtualStrongbox at FinovateFall 2012.

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U.S. Overdraft Revenues to Fall 50% by 2014

By Jim Bruene Posted on July 3, 2012
Categories: Fee Income, Pricing, Strategic Planning

Yes, that headline is pure fiction.

No one can predict the fallout from the bank-bashing, CFPB-loving, election-year-posturing in 2012. But realistically, overdraft charges are about 100x more important to consumers than debit-card interchange, so it’s an area that will be debated in the months and years to come.

While I’m not predicting Durbin-like NSF/OD price controls, there is a material probability that it could happen. And even if the U.S. government steers clear of explicit price controls, we’ve likely seen the peak of OD/NSF income. So here’s my take:

Best case: Real NSF fees drift slowly downward as penalty fees/pricing become more transparent through technology and various regulatory initiatives.

Worst case: See headline above

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Action items
__________________________________________________________________

Hopefully, rising rates, higher home prices, and a healthier lending environment will provide enough revenue to overcome any declines in OD/NSF income. However, those macro factors are completely out of your hands. If you want to control your own destiny, I suggest you consider the following:

More overdraft protection credit lines: A credit line with a 12% to 18% APY (depending on credit score), paired with a $3 flat OD transfer fee, can be a very lucrative product. And it’s win-win. Instead of hammering consumers with a massive penalty fee, you entrust them to pay it back when they see fit.
Fees for value-added services: It’s not going to be easy charging fees for online/mobile services. But you are a business facing difficult choices in how to grow revenues, and subscription fees for new, value-added services are promising.
Insurance products: This is a huge, growing market that is relatively untapped by retail banks and credit unions. And distribution has yet to be moved to the online/mobile channel. So there is a huge opportunity for banks to be the ones to do that. At FinovateSpring, I was impressed by a startup, CoverHound, that has really interesting ideas on how to put a much-needed Web 2.0 spin to the product (demo here). We explored this in great detail in a December report. We also moved it to the number 1 priority for 2012 in our January report (note 2).
Offers and lead generation: Major banks already book major revenues through various third-party programs, such as credit monitoring, auto insurance, and statement inserts. The latest idea, which has attracted more than $200 million in venture capital, is tying merchant discounts and offers to credit and debit cards (note 3).
Branch right-sizing: I’m not saying that branches must go away, rather that the good ones morph into smaller, more efficient financial stores, with a big emphasis on small business, lending and yes, you guessed it, insurance.

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Notes:
1. The neighbor test: Would you rather explain to your neighbor why you charged their daughter $36 for buying one too many lattes on their debit card, or would you rather tell them about your $3/mo “oops” service that warns parents when their child is about to do something stupid with their money. We write about value-added fees all the time in Netbanker, but the last full report is here (May 2011, subscription).
2. For more on banks offering insurance, see our full report here (Dec 2011, subscription)
2. For more on card-linked offers, see our full report here (Feb. 2011, subscription).

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Pageonce Removes Billpay Subscription Fee in Favor of Per-Transaction Pricing

By Jim Bruene Posted on April 25, 2012
Categories: Bill payment, Fee Income, Pricing

Pageonce, the largest PFM from a company not named Intuit, is abandoning its $4.95/mo subscription for mobile billpay and moving to a yet-to-be-determined transaction fee for each bill paid (note 1). The change was revealed at Monday’s Future of Money conference and I confirmed yesterday with COO Steve Schultz.

The company has been testing various price strategies and found that per-transaction prices were more popular with customers. Its model predicts a five-fold increase in volume with the new fee structure, moving from $40 million annually to $200 million (note 2).

Schultz speculated that customers are used to paying this way for financial services. And it helps that an electronic billpay transaction displaces an out-of-pocket cost of $0.50 or so (stamp & paper check).

Pageonce is positioning itself as a mobile wallet, starting from a position of strength on the billpay side, rather than POS transactions. Schultz says eventually they’ll be at the point of sale and P2P as well. Because those three activities are all part of the “wallet experience.”

But the company is not abandoning its PFM roots. Mobile wallets also need tools to manage and track spending. Pageonce is chock full of those.

The company’s business model going forward largely focuses on offers and lead-gen, similar to Mint. But it’s also not completely subscription-fee averse. Its mobile credit score/monitoring service, Credit Guard, is priced at a very competitive $6.99/mo.

My take: While I can’t point to specific tests of my own, most banks that have experimented with transaction fees have found them to be quite unpopular (of course, so are subscription fees). My advice <cue broken record>, for banks anyway, is to bundle several value-adds popular with the target segment and sell the package for a monthly subscription fee (or a discounted annual fee for your fans) (note 3).

How they do it:

Billpay processing is powered by TIO Networks (note 4).
Account aggregation was built in-house
Credit Guard is powered by IdentityIQ

Pageonce showcases its apps for every major mobile platform (link, 25 April 2011)

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Notes:
1. The company is testing fees from $0.25 to $1.00 per bill. I see no reason to undercut the price of postage, so I’d guess they end up closer to $1.
2. Assuming $1,000 in monthly billpay volume per active user, that implies the company currently has only 3,000 active billpay users.
3. For more information on subscription pricing for financial institutions, see our Online Banking Report (May 2011).
4. See TIO Networks demo at FinovateSpring May 8/9.

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New Online Banking Report Published: Delivering that Secure Feeling

By Jim Bruene Posted on April 5, 2012
Categories: Fee Income, Online Banking Report, Pricing, Security, Security & Privacy

OK, let’s think this through. Consumers have been concerned about the security of online banking for more than a decade. Technology tools are available to ease their anxiety. So, why aren’t these tools readily available?

The answer is that most security enhancements don’t pay their own way in terms of reduced fraud. Therefore, these “nice to have” features languish in the priority queue with little hope of getting implemented.

So do we just let customers continue to needlessly fret about the security of their financial accounts?

No, that just irritates already fed-up customers and invites more independent competitors to the table to provide the missing benefits (e.g., BillGuard, Credit Karma, Mint).

Instead, why not move to the win-win solution: Charge an optional subscription fee for extra “peace of mind,” but only to customers who want it. Or offer the value-adds free of charge for customers who help you lower costs by using self-service channels and foregoing printed statements.

But wait. Aren’t fees dead after the BofA debacle a few months ago?

While that was a very real customer backlash, optional fees are still possible. Just keep these rules in mind:

Fees for extra security should NEVER be mandatory; instead, offer a “security bundle” that goes above and beyond the normal state of the art
Do not charge a fee for any security feature you already offer free of charge (the big problem with the ill-fated debit card monthly fee)
Do not charge for a security feature that is typically delivered free of charge by others in the industry
It’s better to bundle a group of extra security features into a relative low-priced subscription bundle

In our new 48-page report we cover:

12 design elements to make your website feel more secure
7 potential positive elements for your business case
5 talking points for staff education before implementing a subscription fee
37 potential security enhancements to bundle into an “extra security” subscription offering
72 additional security features to consider
5 customer segments to target with a fee-based package account
Overview of three promising security services:
— Anti-virus for transactions from BillGuard
— Self-service suspicious activity reporting from Bank of America
— Virtual safe deposit from Northwest FCU, powered by DigitalMailer

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About the report
__________________________________________________________________

Delivering that Secure Feeling (link)
Help consumers reduce perceived risks (for a price)

Author: Jim Bruene, Editor & Founder

Published: 4 April 2012

Length: 48 pages, 8 tables, 12,000 words

Cost: No extra charge to OBR subscribers, US$395 for others here

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Sample screenshot

: Barclays (UK) offers online banking customers free anti-virus software from Kaspersky

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Wells Fargo Shutters its Fee-Based Document Storage Service vSafe

By Jim Bruene Posted on March 26, 2012
Categories: Electronic Statements, Fee Income, Safe Deposit, Wells Fargo

Another innovation bites the dust.

I was a fan of Wells Fargo’s virtual safe-deposit service vSafe. Or at least the idea of it. The service launched in late 2008, before “the cloud” became an everyday term and companies such as Dropbox, Evernote, and Box.net made file storage a competitive business.

The bank was gutsy enough not only to launch a unique service, but also charge for it. I applauded the $4.95 (1 GB) to $14.95 (6 GB) monthly fee at the time, although I personally didn’t use it enough and let the service lapse after the free trial period.

But alas, the bank has apparently given up on vSafe. It’s still listed on the main online banking toolbar (see below), but the tab now leads to a terse statement saying that the bank is no longer enrolling customers (see above). And the product has been purged from the public website.

According to storage startup AboutOne, which is marketing a replacement service for vSafe users, all stored files in vSafe will be deleted on March 28.
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Analysis
____________________________________________________________________

Although Wells Fargo stuck with it for more than three years, even marketing it from the homepage, vSafe must have had little traction. That’s not a huge surprise. Even before Dropbox, fee-based secure file storage was a niche offering. And with the onslaught of better known, cheaper (note 1), and more comprehensive cloud-storage services, it was an uphill battle.

However, we still believe the virtual file cabinet is a good idea for financial institutions, especially as a way to speed estatement adoption.

Instead of charging a fee for basic online storage, make it a free place where bank customers can store their electronic bank statements (from you) for the life of their account. Then, consider upselling additional storage features for a monthly fee. Or bundle file storage with other value-adds into a premium online banking account.

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Notes:
1. Dropbox provides 2 GB free of charge, with 50 GB costing $9.99/mo.
2. In our Online Banking Report publication, we wrote about fee-based online services in May 2011; paperless banking and online storage in late 2010; and lifetime statement archives in 2005.

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Op Ed: Rise of the Feenix

By Jim Bruene Posted on January 19, 2012
Categories: Fee Income, Mobile Banking, Pricing

by Michael Nuciforo

Editor’s note: This post was written by Michael Nuciforo, a Mobile Banking Consultant at Keatan. He previously worked at ANZ on a number of developments, including goMoney, and more recently was Head of Mobile Banking at RBS managing the UK Retail portfolio.

Banks has perfected what I refer to as the ‘negative pricing model.’ In simple terms, fees are charged when customers make mistakes. We are all familiar with it. It is the annoying cost of returning a DVD late, or staying too long in your parking space.

At present, banks rely significantly on revenue generated from fees when customers fall afoul of their terms and conditions. Amongst all the doom and gloom of regulatory pressure, the euro debt crises, and record low margins, could mobile banking be the right service to implement a ‘positive pricing model’?

Tiered charges for access to additional features and content have become common due to the popularity of games such as FarmVille and Sims. This is great news for banks as the market has likely reached the right point of innovation, access and acceptance to allow for the monetization of mobile banking.

Now that most banks have launched first-generation mobile services, new features are perfect for tiered pricing. Areas such as NFC payments and remote deposit-capture are a great place to start. They are tangibly more convenient than existing processes, and are designed to leverage the specific capabilities of a mobile device.

But can banks pull this off? Or will it just be seen as yet another annoying banking fee?

When implementing a pricing model, banks need to be clear about their strategy and objectives. For the model to work, it is critical that unique, mobile-specific services are delivered to warrant the cost. And banks shouldn’t charge for services that they already offer for free today. This will only anger existing users. They should also avoid charging for services available in other channels for free, although some exceptions could apply. Banks need pricing that is fair, transparent and that rewards loyalty as well.

Any new fee will disappoint some customers. Banks should also expect negative media attention at first. This will happen any time bank and fee are included in the same sentence. Banks need to be proactive about engaging regulators during the process and communicating actively to customers. It is important that fees are integrated seamlessly into the customer journey. Regular enhancements should also be made to the service. Success will ultimately rely on the quality of new features.

With traditional revenue streams under attack, and investment in mobile growing, pressure will come on mobile leaders to justify the costs. The honeymoon period for mobile banking will be tested at some stage. Customer retention and transaction migration are fine, but are they enough for your senior executives? And can they be accurately proven?

With customers now familiar with this pricing model in other facets of their everyday life, it is important that banks also take the opportunity to do this now. Otherwise mobile banking, like online banking, will become a free channel for life.

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RIP Debit Fees: The Winners and Losers

By Jim Bruene Posted on November 2, 2011
Categories: Credit/Debit Cards, Debit Cards, Fee Income, Public Relations, Strategies

The debit card fee debacle was an interesting drama to watch. I’m sure there are lots of lessons here for a future biz school case study. But really, was $5/mo for a service that many consumers use daily, such a big deal that even Obama had to call BofA out? We spend two or three times that each month on extra pizza toppings alone, but I don’t see anyone bad mouthing the pepperoni industry.

While it’s clear in retrospect that BofA should have played this differently, rolling out the price increase gradually for instance, or upgrading its debit card product at the same time (note 1), the bank was at least being up-front with its pricing and reasons.

And the whole episode is not just a loss for BofA, but for the whole industry, as one its most popular products is turned into a regulated utility with Durbin controlling prices on the merchant side and public opinion squashing fees on the consumer side.

Here’s the winners and losers from BofA’s capitulation on debit card fees:

Losers

Big banks/shareholders: Obviously, the big banks who were all (except Citi) testing various fee options, miss out on added revenues in 2011 and for however long it takes before they implement other less-transparent price increases. And of course, BofA loses the most as it took the brunt of PR damage and now every pricing move it makes will be put under a microscope.
Small banks and credit unions: The $5 fee was a windfall for small FIs in their marketing war against the big banks. Now what’s the rallying cry for Bank Transfer Day? (And many small FIs would eventually have hopped on the fee bandwagon once the consumer backlash faded.)
Government/taxpayers: The big banks employ millions directly, and millions of other jobs are indirectly supported by banking revenues. If this leads to an industry-wide layoff (note 2), it could add hundreds of thousands to the unemployment roles just in time for the 2012 elections. And the whole anti-bank rhetoric from Congress and the Administration, along with the implied threat of more price controls, makes it harder for banks to raise capital, weakening an already fragile ecosystem. Does anyone really want to risk a repeat of 2008?

Winners

Merchants: Widespread debit card fees would likely have caused a reduction in their use and a corresponding increase in the use of cash, checks and credit cards which would have driven merchant costs up.

Mixed

Consumers: Short-term it’s a win. The grass-roots victory feels good and avoiding the $3 to $5 monthly fee is nice (it just about covers that Netflix price increase…so you can keep getting the DVDs in the mail). But longer-term, it’s probably a wash. Banks need to improve revenues, or they will either have to cut services, lay off employees, and/or find sneakier ways to raise prices ($40 overdrafts anyone?).

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Notes:
1. We recently looked at optional fee-based services banks could build using remote banking value-adds. See our May 2011 Online Banking Report (subscription).
2. I’m not predicting layoffs. Honestly, I have no idea. There are way too many factors at play to make a direct connection. But certainly, the one-two punch of interchange price controls combined with the fee backlash, make cost cutting seem the more palatable course of action to improve profits. And to the extent that smaller players pick up incremental business, they could hire a good chunk of those laid off.

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BillGuard’s Monthly Credit/Debit Card Scan Report

By Jim Bruene Posted on October 5, 2011
Categories: Credit/Debit Cards, Fee Income, Security & Privacy

We’ve been impressed with BillGuard since we first learned about it earlier this year. And they wowed the crowd at Finovate two weeks ago with a great demo, dynamic presentation and more importantly, a product that resonates with consumers across many demographic segments.

One great thing about becoming a trusted consumer watchdog, like identity theft monitoring services, is that your monthly emails are actually read by customers. And unlike FICO scores which usually don’t fluctuate that much month-over-month, there’s usually something new to look at when BillGuard scans a month’s worth of card transactions looking for oddities.

For example, my scan for September across two credit card accounts showed the following activity (see first screenshot below):

Green: 61 transactions that were identifiable as "normal" activity
Orange: 2 transactions that were "unknown"
Red: None were flagged red indicating suspected fraud

Clicking through to the website, I can mark legitimate transaction "OK" and that information is fed back to the network and disseminated to other via the Merchant Transaction Reliability score (see second screenshot).

Bottom line: This is the kind of value-added service that FIs could bundle with other products, even a debit card for example, that could help justify a monthly fee. $5 perhaps?
(Note: BillGuard is currently offering free of charge to expand the customer base.)

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1. BillGuard emails a monthly Scan Report to customers (4 Oct 2011)

2. At the BillGuard website, each merchant’s score across all users is tracked
Note: Apparently, 17 BillGuard customers are using Quickbooks Online and none have flagged the transaction (which makes sense)

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