Checking Pricing for Revenue Growth and Account Acquisition

Many are searching for how to re-price checking accounts to grow revenues.  Revenues are down 20% from 2010 levels, and FDIC data shows no growth in Service Charges on Deposits in 2013 over 2012.  This lack of revenue growth comes despite many efforts to impose new fees on customers, such as charging for paper statements, ending free checking, encouraging “package” accounts where bundled shopping or identity theft services are offered for a fee with the account, and relationship accounts.

The reason these pricing strategies are not working is that most customers do not want to pay these fees for the services offered.  The results for most banks is revenue growth does not occur, and acquisition of new accounts is hindered by the fees.   Rather than trying to impose fees on most customers who do not want to pay, banks would be better serve to impose significant new fees on the few customers who are very willing to pay for the services they want. 

For example, as the chart below shows from one of our clients, some customers today who willing use overdraft or debit card services heavily have no objection to the high fees they pay per account.  This model of earning revenues from a few customers who willingly pay has long been far better than trying to raise prices for everbody.  For example, movie theaters would not make more money by raising ticket prices, but by raising popcorn prices for those who willing want popcorn.  Gas stations would not make more money by raising gas prices but by raising in-store prices for those who regularly shop at the store.

As the chart shows, our experience is a large segment of revenue will come gladly from a small segment, 15%, who want accounts with “no overdraft fees ever,” not even return check charges.  Unfortunately, banks do not offer this service, so non-banks are booming by offering these services.  Other existing revenue segments of heavy over drafters and debit users can also grow with better service.  Most importantly, this approach to checking pricing drives not only higher revenue per customer but also higher account acquisition by better matching customer needs to willingness to pay fees.

Our PaySound^® Checking Plan with no overdraft fees ever, PaySound^® companion card that is “better than prepaid and PayPal” for shopping online and spending control, and overdraft service improvement drives 30% growth in revenue, and customer acquisition.  Click here to learn more!