Since interest rates have hit bottom -- reducing the revenue that banks generally pull in from products such as loans and securities -- banks have been scrambling to come up with new sources of revenue, generally in the form of banking fees. This endeavor has turned into a sort of tug-of-war between banks -- which are continually trying to come up with creative new charges -- and customers, who just as persistently resist such fees.
The situation has turned into a real battleground, with regulatory agencies like the Consumer Financial Protection Board throwing its weight around on behalf of the consumer, as well. Even banks have learned to be cautious. Bank of America (NYSE:BAC), for example, decided late last year to put off levying any new checking account fees, still suffering from the beating it took over the infamous attempt to institute a $5 debit card fee on its customers the year before.
Mobile banking: a new frontier for fees
One area of consumer banking is showing promise for fee generation, however: mobile banking. While not exactly joyful about paying new fees, bank customers are showing signs that they are less apt to balk at charges associated with Internet and mobile banking services.
A recent survey by ath Power Consulting showed that one-third of consumers would consider paying some type of fee for mobile banking services. Not a majority, of course, but quite an increase from the previous year, where only 20% responded that they would entertain such a notion. As for small businesses, over 60% expressed a willingness to pay for mobile banking products.
Banks are anxious to make money off of their mobile customers, but they don't relish the type of backlash B of A experienced. Yet, banks have a point. Downloadable apps cost money to create, with estimates of between $1 million and $5 million for each project. Surely, banks can be excused for wanting to recoup some of that investment in research and development. Some already do -- U.S. Bancorp (NYSE:USB) has been charging $0.50 per mobile check deposit for over two years, and Regions Financial (NYSE:RF) charges for this service, too. U.S. Bancorp notes that customers have willingly paid for this amenity, and Regions plans to further monetize its mobile banking services platform.
Big banks aren't jumping in -- but they should
Regional banks seem to be the trailblazers here, while larger banks like Bank of America and JPMorgan Chase (NYSE:JPM) give mobile services away for free to their customers -- and JPMorgan, at least, plans to keep it that way for the foreseeable future. Wells Fargo (NYSE:WFC) is the only big bank to dabble in assessing mobile fees, doing so for premium services such as emergency bill pay services, and bank-to-bank transfers.
Have banks finally hit upon a method of assessing fees without incurring customers' ire? It seems so, and they would be wise to take advantage. The newness of the mobile banking segment is a real plus since, as this article from American Banker notes, it is harder to suddenly begin charging for something that until now had been free. Fees are big money -- consider that overdraft fees made up approximately 60% of banks' checking account fee revenue in 2011 -- and banks have an opportunity to make some real money with mobile without experiencing repercussions from irked customers. What could be sweeter?