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Management Strategies

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Community Banks Benefit From Big Banks' New Fees

Community banks are finding opportunities to attract new business in the wake of customer frustration over new fees recently announced by large banks.

Recent announcements by large financial institutions such as Wells Fargo, JP Morgan Chase, SunTrust and BB&T of plans to charge their consumers new fees seem to have raised consumer discontent to a new level, with some customers of big banks looking to take their business elsewhere. Some community banks and credit unions are taking advantage of this situation, seizing it as an opportunity to gain new customers and drive growth.

Most recently, Bank of America's announcement of an impending $5-per-month charge for debit card users seems to have created a groundswell of customer frustration. "There's something about this particular fee that seems to be very tangible for the consumer. It's very transparent," says Jim Briand, senior vice president at Middlesex Savings Bank, a $4 billion institution headquartered in Natick, Mass. "Our phone center immediately started getting more calls, first from customers saying, 'Are you going to be doing this?' We also immediately saw people coming into our branches specifically citing this change as the reason why they're switching banks. What we were hearing was that they were frustrated to begin with and this fee was just the last straw."

Briand says that he saw this flurry of discontent as an opportunity to leverage what the bank had been doing all along. "We're a mutual bank, so we've operated with a lower fee structure to begin with than the larger institutions -- one of our key value propositions and an advantage," he explains. "This situation gives us an opportunity to emphasize that point."

Middlesex Savings has tweaked its online and radio messaging to reach dissatisfied customers of big banks and promote a positive view of the bank as a whole. "The fee is only one piece of the message, which is: 'You can have a better banking experience," says Briand. "You don't have to put up with these things. There is an alternative.'"

Bank of America's recent debit fee announcement also spurred St. Petersburg, Fla.-based Community Bank & Company ($750 million in assets) to come out with a special promotion that's quite the opposite of what Bank of America is doing: giving $5 per month for 12 months to new customers who open checking accounts with direct deposit. "We thought we could really set ourselves apart from what the national banks are doing by instead of charging them $5 a month saying, 'here, we'll pay you $5 a month,'" says Trevor Burgess, Community Bank & Company's principal shareholder and the originator of the bank's new promotion.

Burgess says that Community Bank is able to do such a promotion is because its business model is much different from a national or global bank. "I believe that big banks probably need to charge these fees to make money. But just as they need to charge these fees to make money, we don't need to charge these fees to make money because we have a very simple business model that's focused on lending to and serving our local communities," he explains.

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