RIP Debit Fees: The Winners and Losers

image 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.

Part 2: Chase Apologizes for Outage in Customer Email but is Light on Details

image Over the weekend, Chase Bank sent a short email apology to its online customers. Overall, the message was fine and now the bank can check that off its to-do list.

I’m glad the bank didn’t waste a hundred million dollars giving everyone a $5 credit. A simple apology is the best approach, preferably during the actual outage. This message, six days after the initial downtime, is a bit sub-par for a company with the resources of Chase (for a review of its initial communications, see our previous post and today’s review at The Financial Brand).

Analysis of the Chase email (screenshot below): Overall, the email message was adequate. The title was good, “Please accept our apologies.” And that was all most people needed to hear. But I’m a little surprised by the lack of detail provided within the message. Especially, considering the much better note posted to Chase.com over the weekend, then apparently taken down (see note 1 below).

In Sunday’s email, Chase reassured customers that “(your) account information was not compromised.” That’s great, but the bank could have scored extra points by saying exactly what went wrong, how they fixed it, and what they are doing to prevent a recurrence (this info could be delivered via a link to more detail on the website.) 

The bank should also have made the apology unconditional. Chase’s exact words (italics mine), “we apologize if this created difficulties” and “please accept our apology for any inconvenience this may have caused.” Forget the conditions. Assume it inconvenienced everyone and just straight-up say you are sorry.

Another no-small thing. A note of apology should be from an actual person (like the bank’s website message, note 1). The lack of a signer imparts a nagging impression that no one at the bank has stepped up to own the problem. An email address or phone number for additional info would also make it seem more sincere.

Finally, according to the info posted on the site over the weekend, the bank is covering late fees caused by the outage (see note 1). Perhaps that email went only to bill-pay customers (which I am not). But still, why not mention it?  

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PS  One last question and then we’ll move on, promise. Why was the online apology taken down after just a few days? Many customers affected by the outage will never see the all-important public apology on the bank’s homepage (see screenshot at The Financial Brand).

Chase Bank apology email (19 Sep 2010, 2PM Pacific)

  Chase Bank apology email (19 Sep 2010)

Note:
1. According to the New York CBS affiliate, the following appeared on the Chase website on Friday, 17 Sep (link):

We are sorry for the difficulties that recently affected chase.com and we apologize for not communicating better with you about this issue. As you may know, we experienced a significant service interruption and Online Bill Payments that were scheduled to be sent on September 13, 14, or 15, 2010, were sent by the morning of September 16, 2010.

If you scheduled a payment to be sent during those dates, but do not see it reflected in your payment activity by September 16, 2010, please contact us.

We are working hard to make sure that any late fees you may have incurred as a result of this processing delay are being refunded:

  • If your payment was to another Chase account (for example, Chase Credit Card Services), we are automatically refunding any late fees.
  • If your payment was to anyone other than Chase (for example, your telephone service, utilities or another financial institution), we are contacting many payees to prevent late fees from being charged.
  • However, if your payee charged you a late fee, please call us at one of the numbers below or visit your nearest Chase branch. We will refund the late fee to you.

We recommend that you keep this letter in case you need to provide information to your payee.

Please be assured that Chase’s online security has not been compromised as a result of this service interruption. Your accounts and confidential information remain safe and secure.

Giving you 24-hour access to your banking is of the utmost importance to us. This was not the level of service we know you expect, and we will work hard to serve and communicate with you better in the future.

Again, please accept our apology for this disruption and thank you for your patience. If you have any questions, please stop by your nearest Chase branch or call:

  • 1-800-935-9935 for Personal accounts
  • 1-877-CHASEPC (1-877-242-7372) for Business accounts
  • 1-800-848-9136 for Home Lending and Auto accounts
  • For credit card accounts, please call the number on the back of your card

Sincerely,

Patricia O. Baker
Senior Vice President
Chase Executive Office

Lessons from Chase’s Online Banking Outage

image For much of Tuesday (see note 1), Chase Bank had a message in the upper left corner of its website saying that the website was temporarily unavailable “due to scheduled system maintenance” (screenshot here). Later in the day, the bank finally took that excuse down and merely said that the site is “temporarily unavailable” (see screenshot below and inset).

The outage appears to have afflicted iPhone app users as well. I tried several times and was not able to connect. But, unfortunately, and here’s a new downside for an app compared to a website, there is no way for the bank to warn users within the app that there’s a back-end problem. So users just tried and tried to connect. 

Interestingly, text banking seemed to continue working, at least on the card side. During the outage I was able to retrieve the current balance and available credit via a text message to the bank’s shortcode. That could be an interesting side benefit to text banking, “works if the website is down.”

Lessons for Netbankers: There’s no way to avoid the occasional tech glitch. The important thing is how you handle it. Today’s salient lessons reveal how to communicate during downtime, scheduled or otherwise.

1. Homepage warning: The message on the website is crucial, and Chase does an okay job prominently posting a concise warning on the homepage. Sure, the bank could have been more specific, but when you are in the middle of an IT crisis, there often isn’t a whole lot more that can be said. Still, they were tardy in pulling the “scheduled maintenance” excuse down.

Chase website grade = B-

2. Referrals to other channels: Some of the press reports quoted a Chase spokesperson referring users to the toll-free number as well as ATMs and branches where the systems were apparently working fine. The bank’s website message should also have made those recommendations. Even if live operator support was hopelessly backed up, the bank should admit that and encourage customers to call the toll-free number to check balances and other activity. 

Chase website grade = F

3. Apologize and reassure: From crisis management 101: apologize first, then reassure customers and tell them what you are doing to fix the problem. Chase was doing little of that from what I can see. There was no apology. There was no real explanation. And there was no reassurance that your money was safe. The information void was left to be filled with tweets and blog-post speculation. (15 Sep update: When I logged in today for the first time since the outage, there was no mention of the problem. And oddly, my last login showed as having happened during the middle of the outage. I’m trying to figure out how that could be; perhaps from my attempted iPhone app login?)

Chase website grade = Incomplete (I’m sure it’s coming, but it should have been visible today.)

4. Communications to mobile customers: If the mobile app is also down, you need to proactively send a message to app users explaining the situation. Conversely, if the mobile app or text messaging is working, refer Web customers to those channels.

Chase mobile grade = F (didn’t see that message)

All in all, a bad day for Chase online banking. But a good learning opportunity for everyone else.

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Chase Bank homepage with “unavailable” message (14 Sep 2010, 3:41 PM Pacific)

Chase Bank homepage with new

Online banking main page with unavailable message (14 Sep 2010, 3:41 PM Pacific)

Chase Bank online banking main page with unavailable message

Note:
1. According to various Twitter messages, Chase online banking went down at about 10 PM Eastern time on Monday, 13 Sep and came back online a few minutes ago (1:45 AM Eastern, 15 Sep, Wed.), a little under 28 hours.

BankSimple Scores More Press

image In the history of online banking, has there ever been so many words written about a company before it’s even opened for business? I can’t think of any.

It’s a two-edged sword. Free publicity is great for building a brand. But it can also ratchet expectations up so high that delivering the goods becomes harder.

The BankSimple team is keeping things low-key on its website. You even have to search a bit to figure out how to get on its mail list (see note 1). But some of the press accounts are downright giddy over the yet-to-be-launched-nonbank bank (note 2).

image Case in point: Friday’s Mashable post which generated 1,000 Tweets, 365 likes, 33 comments, and eight Diggs. The author, Jennifer Van Grove gushes about BankSimple, using terms usually reserved for a new Apple i-something launch:

The Banksimple formula is one that puts customers first and focuses on automatic, “worry-free” money management with a digital twist and penchant for social integration.

…the startup’s bleeding-edge approach to banking that we predict will be both controversial and groundbreaking.

And these were the subheads in the article:

  • A New Way to Bank
  • Predictive Money Management
  • Social Media Meets Banking
  • Fee-Free for Real
  • The Zappos of Banks

But after all that setup, the reader comments were predominantly skeptical/negative. I think it all sounded a little too good to be true.

Relevance to Netbankers: Despite the skeptical Mashable comment thread, there is a real appetite in the country (world?) for fresh ideas in the banking sector. But there’s also huge trust hurdles for financial startups. BankSimple is planning a hybrid model. A Web-based, social-media-loving startup running on the banking rails (note 3). It worked for PayPal. It will work again (note 4).

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Notes:
1. Prospective customers must first click on the Join tab on the far right of homepage. Users are asked for their email address (obviously) and something I’ve not seen before, their bank balance. Maybe it’s just me, but that seems a little too forward for a beta invite page and may dissuade some from leaving their name. Also, it seems just a bit out of step with the bank’s populist message. Not a big deal.
2. And given that this is our third post on BankSimple, I guess we are in that category as well.
3. We’ve written about this theme many times over the years; the last time we published a full report was almost ten years ago: Online Banking Report: Building the Amazon.com of Financial Services.
4. This is a general statement. Until I understand what it’s doing, I’m not predicting anything about BankSimple, other than it will get a lot more press.

Chase Adds 2 Million Facebook Fans in $5 Million Charity Giveaway

image If a category existed for “corporate wins in social media” in the Guinness Book of World Records, Chase Bank would surely hold the top spot today. In its recently concluded effort, two million users became Facebook Fans of Chase Community Giving in order to direct $5 million in donations to their favorite charities. 

In round one, Chase fans were given 20 votes to parcel out among 500,000 eligible 501(c)(3) charities. First-round voting ended Dec. 12. The 100 charities with the most votes were declared finalists and moved into round two. Round two voting ended Jan. 22, 2010.

The winner was awarded $1 million; five runner-ups received $100,000 each; and 100 finalists received $25,000 each. The winning charity, Invisible Children, received more than 100,000 votes as did second place Isha Foundation. But anyone looking to recreate Chase’s success should think carefully about the official rules. With less than 1200 votes separating the two charities, and with $900,000 at stake, there were accusations of voter fraud in the Chase contest. Future contests will likely give the bank some leeway in declaring a tie and splitting the pot equitably.

Relevance for Netbankers: If you still have social media naysayers in your company, give them the link to Chase’s recap page (screenshot below). That ought to get their attention. 

Contest recap on Chase’s Community Giving Facebook page (link, 31 March 2010)

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Note: For more info on social media strategies for financial institutions, see our subscription site.

Great PR: Fast Company’s "One Bank to Love," Triodos Bank

imageOne magazine I always look forward to receiving is Fast Company, not only do they love the same companies as we, but their pages are chock full of ideas and real-world case studies. I find something inspiring in every issue.

But I was surprised to spot (April issue) this headline in the upper-left corner of the cover —

One Bank to Love

— and immediately thought of Vancity. But the object of Fast Company’s affection this month was Triodos Bank, a Dutch bank founded in 1980 (company timeline) with a mission similar to my Vancity friends in Vancouver. Wikipedia says Triodos is a pioneer in ethical banking and that it “lends only to companies and nonprofits with social or ecological benefits.”

image And to prove that they follow this mantra, Triodos maintains an open database of the organizations it lends to. You can search by country and sector, or narrow your search to specific topics such as “wind farms” (see UK results below).

Search results at Triodos Bank UK for “wind farms” (link, 24 March 2010)

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Relevance to Netbankers
While many negative stories have yet to run, the tide may be about to turn. The press will increasingly be looking for positive stories where banks and credit unions are helping customers and small businesses flourish. You can help by identifying individual success stories within your customer base.

Or go full bore with a searchable database of your commercial loan customers, especially those in nonprofit sectors. Naturally, this requires written consent from your clients, but if there’s something in it for them (e.g., free publicity), you should get quite a few takers.

If that’s a little too open, you could anonymously map commercial loan recipients (similar to the screenshot above). That would demonstrate your involvement in various communities/neighborhoods without a lengthy consent process. 

Great Recoveries: Major Banks Respond to Negative Blog Items Immediately

image Twice in the past few weeks, I’ve written blog posts that had one or more criticisms about specific experiences with a bank’s product. My complaints weren’t Huff Post calls to arms or anything particularly serious, just small things that had gone wrong (previous posts here and here). And our blog, while well-read in the banking industry, is just a rounding error in terms of mainstream readership.  

But in both these examples, the bank reached out to me almost immediately, offering to help solve the problem. In one case, I received a phone call (several actually) from the bank’s PR department and the other bank left a message on our home phone (note 1) from the “executive office.” 

My take: I am shocked to have heard not once, but twice in the same month from mega-banks looking to solve small, albeit public, customer-service issues. In 15 years of covering the industry, including three with a public blog, I have never had a single “official” call from a bank about a problem I’ve written about (note 2).

Businesses have long debated how to handle negative conversations in social media (see note 3). Do you stay on the sidelines, anonymously participate in the conversation, or reach out with offers to help?

Clearly, offering to help is the way to go. However, you must choose your words carefully because everything you say can and will be used against you by a blogger bent on revenge or ridicule.

But I can tell you now from experience that it’s powerful to be contacted by the business you’ve written about. My reaction goes something like this:

  • “Uh oh, now I’ve offended a reader; I’d better think twice about posting negative comments again.” At the very least, I’ll certainly make sure my coverage is extremely balanced in the future. No potshots, that’s for sure.
  • “Wow, this bank really cares about its customers and reputation.” That makes me feel much better about them.
  • “Seriously, a big bank that calls its customers when it hears about a problem; impressive as hell!”

So going forward:

  • I’m more likely to look for something good to say about the bank to make up for the negative item. 
  • I may post an update to the original entry, or even an entire post like this, complimenting the bank on reaching out to resolve the problem.
  • I’ll probably tell my friends the story, either privately, or more publicly via Twitter, Facebook, etc.

These are pretty good results from a relatively low-cost phone call. Sure, my problems were fairly simple and easily resolved, and it may be harder to appease a blogger whose home was recently foreclosed. But why not try? As long as you stay calm and try to keep things constructive, there’s very little downside and a lot of upside.

So congratulations Citibank and Capital One, your performance has been truly remarkable. (Are we good now?) 

Note:
1. The bank must have looked at our actual account info to get the home phone number.
2. I have received the occasional email from a subscriber, but no proactive effort to provide help.
3. For a wonderful overview of the ins and outs of responding to bloggers, read the two-part post (here and here) from Vancity’s MVP and third-ranked innovator on the planet, William Azaroff. 

Another Black Friday Banking Special: Service Credit Union

imageING Direct wasn’t the only one with a Black Friday promotion (yesterday’s post).

Portsmouth, NH-based Service Credit Union also took advantage of the U.S. vacation day to promote a special 10% APY 3-month CD ($1,000 max deposit) and 1% off loan rates (promo page). But unlike ING Direct, the CU’s special offers were redeemable only in its branches, which opened at 5 AM to mimic giant retailer early-morning specials.

The offer was promoted in a rotating banner on the homepage (see inset and screenshot below). And it had its own landing page (see screenshot below).

I like the creativity, so I’ll give them an A for effort. But seriously, opening at 5 AM? Maybe they were hoping for PR exposure, but it’s just not right (note 1). I understand (sort of), heading to Best Buy in the middle of the night to save a couple hundred on a TV. But who would go to their bank at 5 AM to make an extra $20 on a CD (note 2) or apply for a car loan (note 3)?

But there was one offer in the fine print that was more valuable for a typical Black Friday shopper, fee-free gift cards until noon. Although, I’m not sure why they limited the number to five per customer. 

Hat tip: Bank Deals blog

Service Credit Union Black Friday promo page (link, 27 Nov. 2009, 9 AM Pacific)

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Service Credit Union homepage

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Notes:
1. Now if you have in-store branches, it’s another matter. Desert Schools FCU opened its 24 WalMart branches at 5 AM along with the retailer.
2. Extra interest on a $1000 CD for 3 months is about $7 per month, or $20 total. And that’s before tax.
3. The almost unreadable type on the bottom of the small banner mention great prizes and giveaways, but the landing page makes no mentions of prizes. Now, free stuff would make it worth a trip to the branch, so I wonder why the CU didn’t mention that on the promo page? Maybe they didn’t want people to show up only for the prizes? 

Bank of America’s Launches Personal Finance Tips Site

image Bank of America’s latest online effort is a personal finance educational site at <learn.bankofamerica.com> that includes consumer polls, money savings tips, videos and articles. Bank products are sprinkled throughout but the marketing is relatively restrained.

It’s a solid effort. Good, concise copy married to an attractive graphical layout. And for a bank the size of Bank of America, it makes perfect business sense. The site moves a little product, builds the brand, shows off the bank’s consumer-friendly side, provides material for PR campaigns, and gains some CRA credit (note 1). 

But I’m not sure how much usage it will get other than the curious driven to it from banners within online banking. That’s how ended up there today after paying my BofA credit card bill online (see second screenshot below).

Given Bank of America’s 30 million online banking customers, they must not be driving much traffic to the site yet. According to Compete, traffic surpassed 100,000 for the first time in October. July was the first month that traffic was registered at the site.

Unique monthly visitors to BofA’s personal finance tips site (July through October, 2009)

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Source: Compete

Other than enabling an RSS feed for article updates, the site has no Web 2.0 or social media features. No blog. No forum. It’s just a very pretty face on personal finance 101 material. It will be interesting to see where they take it.

Learn.BankofAmerica.com homepage (link, 13 Nov. 2009)
Note: I completed the poll on the middle of the page, so the results are shown rather than the poll question.

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Logoff screen (13 Nov 2009, 3 PM Pacific)

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Note:
1. CRA = Community Reinvestment Act which requires banks to help meet the financial and credit needs of low- to-moderate-income consumers.

Out of the Inbox: Upbeat Customer Email Message from Umpqua Bank

image I recently opted in to the Umpqua Bank email list. And even though I’m not a customer, I received an upbeat message this morning from bank president Ray Davis (screenshot below).

This email appears to be geared towards businesses (see the closing line below). And that makes sense because I’d recently been looking into its business social network (note 1). But the message is on-target for consumers as well.

The well-written 185-word letter covers three main topics:

  • A cautiously optimistic message about the overall economy
  • Some tangible evidence (new banking division, new lending teams, new capital, and 20,000 hours of community service) that the bank is a forward-moving survivor
  • Reassurances to customers that they were well-capitalized and moving closer to repaying TARP money

The tone was completely soft sell. There is a link to its online switch kit at the bottom and links to its LocalSpace business social network and Twitter feed (note 2) on the right. It’s more “we’re in this together” than sales pitch and closes with this wonderful line:

As we wrap up 2009 and look ahead, I encourage you to commit to the spirit of recovery and take action that positions you for the future.

We recommend that every other well-capitalized bank and credit union send a similar message before the holidays. We are about to move into the annual “year in review” exercise in the media, and this year’s 100+ U.S. bank failures will be high on the list. Remind your customers, members, employees that you are still a vital member of the community. And that for every financial institution that went under, there were a 100 like yourself that did not. 

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Notes:
1. For more info on the small-business market, see our latest Online Banking Report: Small Business Online & Mobile Banking.
2. Umpqua dreamed up one of the most compelling reasons we’ve seen to follow a bank, or any company for that matter, on Twitter (with the possible exception of the tweeting bakery): updates on its truck handing out free ice cream (Umpqua Twitter page).