How banks act a lot like airlines when it comes to fees

Coins falling into outstretched hand

If the recent bank fee scheme seems vaguely familiar, it should: We last saw this behavior from America's largest airlines. But are banks really in any position to "unbundle" their services the way the airlines did?

Corey Yulinsky, a partner with Booz & Company Financial Services in New York, thinks not.

Blogging in Bank Think, Yulinsky sees three problems with the industry's pile-on-the-fees response to flagging revenues:

-- Adding fees now for what customers perceive as free services fails to demonstrate the value of those services in a way that will convince consumers that the price is fair.

-- Imposing fees during a downturn risks alienating consumers, daring them to take their business elsewhere.

-- Defaulting to a fee-frenzy strategy overlooks existing and emerging ways that banks can make money, now and in the future.

Instead of charging the banking equivalent of luggage fees and paper-ticketing surcharges, Yulinsky suggests that banks open their eyes to other revenue sources that can follow by simply getting to know their customers better.

Skillful use of customer data will ultimately determine the winners and losers in the banking industry over the next few years, he says. Banks that still think of their customers as three classes -- the masses, mass/affluent and affluent -- will miss the opportunity to build the kind of in-depth customer profiles that will enable them to offer customized services from which new revenue streams will flow.

That customer data also can be aggregated and sold to corporate and small-business customers (with the appropriate opt-ins, of course) and become the basis for new businesses within the bank. Once banks get the hang of data marketing, they can develop additional revenue streams by offering "white label" analytics to other financial institutions and companies that provide consumer products and services.

Don't follow the airlines, Yulinsky urges banks. Instead, follow Amazon.com.

"It purposefully looked for ways to monetize the capabilities it needed for its core business," Yulinsky says. "On one level, these endeavors are very different from selling books online, but they [are] highly related from the perspective of building and leveraging capabilities."

Yulinsky's insights confirm what consumers already suspect: Banks that bump fees are simply taking the easiest way out of a jam they created.

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