It's All About the Fees

There are many ways banks can differentiate themselves and attract new customers, and retain and expand relationships with old ones. Certainly, offering convenient services like mobile RDC and mobile bill pay is one way. Offering a robust app for the tablet -- a device quickly becoming most favored by consumers -- is another. Perhaps having an extensive branch network with convenient locations can also attract customers.

But, in most cases, it usually comes to down to what it always has: fees. Time and again, surveys of bank customers find that the main reason they switch financial institutions is because of fees.

This week, TD Bank released the results of a customer experience survey it conducted, which polled 3,000 consumers with checking accounts at various banks. According to the "TD Bank Checking Experience Index" 83 percent of consumers rank their checking experience as "excellent" or "very good," but 36 percent of the respondents indicated they would consider changing banks because of fees.

[Related: The New Bank Fee Model?]

Non-bank ATM fees were ranked most frustrating by 38 percent of respondents, followed by overdraft fees at 27 percent. Only 13 percent of consumers ranked minimum balance costs as the most frustrating for their account, according to the poll.

However, the poll found that the banking industry scored well in the areas of convenience and accessibility with 74 percent of consumers ranking bank hours as excellent or very good and more than two-thirds of consumers giving high marks to convenient locations and ATMs (70 percent and 69 percent respectively).

Overall, checking account holders are making 15 banking transactions each month with six of those transactions being made online. Nearly 80 percent of checking account holders use online banking with their financial institution and 50 percent of consumers prefer online banking, using it primarily for money transfers and bill payments, the poll found. ATM banking is the second most popular channel, seeing 3.2 transactions a month, followed by in store and mobile (2.3 and 1.5 transactions respectively).

This is certainly not the first study to find that consumers don't like fees associated with checking accounts, and won't be the last. The much ballyhooed Bank Transfer Day of 2011 was all about protesting fees, though the numbers of actual consumers who switched banks as part of that movement remain anecdotal. Listen, no bank is going out of business because a few customers leave here and there due to checking account fees. At the same time, banks need to be sensitive to this: consider the backlash and attendant negative PR Bank of America got in response to its proposed $5 debit usage fee in 2011.

As for a solution, there has been talk of a pay-by-transaction model for bank services as opposed to the traditional flat-monthly-fee models that many banks currently utilize. This is likely a more popular model among consumers, but obviously specifics would need to be hashed out before being adopted by the banking industry wholesale. But I do believe the "pay as you go" model will eventually be the future of fees down the road.

Bryan Yurcan is associate editor for Bank Systems and Technology. He has worked in various editorial capacities for newspapers and magazines for the past 8 years. After beginning his career as a municipal and courts reporter for daily newspapers in upstate New York, Bryan has ... View Full Bio