After a year-and-a-half of research, Bank of America Corp. (BAC -2.44%) has debuted its new checking account product, "Safe Balance", which is aimed specifically at customers who have consistently low checking account balances.
The new account is being offered in five states, as well as Washington, D.C. For a flat $4.95 monthly fee, the account doesn't support overdraft fees; if the account level drops too low, transactions simply won't be completed. The account allows users access to online and mobile banking and bill paying services, but does not include paper checks. The monthly fee is non-waivable.
The creation of a new revenue stream targeting an underserved consumer segment is great news in itself, but there's an even more important revelation here. In this product, Bank of America has shown that it has taken into account the concerns not only of regulators, but of customers – a group that the bank has been chronically mishandling since the financial crisis.
Moynihan's special project
The Wall Street Journal notes that CEO Brian Moynihan has spearheaded the effort to find new sources of revenue since he took the helm in 2010, at a time when banking reform laws were taking a big bite out of fees banks normally charged for overdrafts on checking and debit-card accounts. The four-year project has included some missteps, such as the famously retracted $5-per-month debit card account fee in 2011.
The bank took a lot of criticism for that blunder, which gave the impression it was impervious to consumer complaints about the fee, since other banks learned from B of A's very public thrashing and dropped their own plans for a similar monthly charge. This episode made Moynihan especially sensitive to the issues of banking fees – which likely led to the 18-month research on this new product. After testing various choices in markets such as Arizona, Georgia, and Massachusetts in 2012, the bank learned what consumers wanted the most was predictability – even if that meant a consistent monthly fee.
If all goes well, Bank of America plans a national rollout of Safe Balance later this year. As free checking accounts become less common – particularly for low-income and younger consumers – products like the Safe Banking account can draw in customers that might otherwise use a prepaid debit card, or other non-bank services. Bringing these consumers into the bank creates a relationship, and a dependable revenue stream for the bank.
For Bank of America, it also represents a clear example of how it can listen to, and learn from, its customers. For the bank's damaged reputation, that could be priceless.