Regulation Has a Cost – Part Two
March 05, 2013
March 05, 2013
Can you assign a cost to fee waivers?
Consider both tangible and intangible factors
This is part two in a series of essays on the cost of regulation in the banking environment. While everyone knows that regulation has a cost, and has for years, it is interesting to consider specific components of that cost. Sometimes, there is more than one, for example, the cost to customers and the price paid in customer satisfaction. As the customer service experience is assessed, analytics can help identify cases in which a change, while still in compliance, can make a major difference in the customer satisfaction level.
Considering that banks are at an all-time low in satisfaction ratings, a major priority should be recognizing, identifying and fixing the issues that affect the customer experience. And with major financial services institutions looking to find the right balance among the seemingly conflicting objectives of revenue generation, improved operational efficiencies and customer satisfaction, it’s as good an opportunity as any to review and fine tune customer retention strategies.
Today’s retail banking climate is very different from that of even five years ago, when a number of banks were serving customers they considered to be less than ideal. The emphasis now is on retaining the good clients who remain on their rolls, while still remaining profitable — even in a period of historically low interest rates.
In the ongoing effort to find a successful balance with deposit accounts between customer satisfaction and revenue generation, the issue of waiving or not waiving fees nearly always comes up. Listening to just a few customer calls reveals that customers are already unhappy when they call, either because they feel they did not know about the fee to begin with or because they don’t think they really owe for the fee at all.
A recent study of deposit accounts indicated that 10 percent of deposit calls involved requests to waive overdraft fees, so this is certainly a significant issue.
There are a number of decision points in this discussion, with answers that lead in many directions. The challenge is that none of the points stand alone, yet it is not easy to view them in combination. Ultimately, customer satisfaction that leads to a profitable, revenue generating relationship will come when each point is thoughtfully calculated.
Let’s look at some of these considerations:
After reviewing the procedures agents used to grant or deny waivers, study recommendations included standardizing rules on fee waivers and granting up to two requests per person due to customer error. The bonus recommendation was that fixed policies like this opened the door to the use of automation, which would further reduce the cost of a waiver.
The ultimate recommendation, then, may be guided less by hard costs than by the CSAT impact of the decisions.