Banks Can Boost Profits Without Raising Fees On Its Poorest Customers

Sallie Krawcheck

Business Insider

This post originally appeared on LinkedIn. Follow Sallie on LinkedIn



The topic of banks increasing fees on unprofitable “low balance” (ie, low income) customers is back in the news.

Here’s an idea for the banks: Don’t. And never do.

Instead, think about the issue in a completely different way:

Think of the provision of basic banking services as a valuable public and community service you provide for some group of these low-income individuals.

Think about it, categorize it, quantify it, analyse it, talk about it….heck, crow about it….in the same vein as the (very significant) donations you make to non-profits and the community service days you organise your employees to participate in (but without the matching bank t-shirts and the annual report photographer on hand).

Think about it as a return you provide to taxpayers for the explicit and implicit public support banks receive.

And think about it as a means of bringing your formal “Corporate Value Statements” – the part about making the communities in which you operate better places – to life in a tangible fashion.

The good news: Don’t think about it as costing you much, as the fixed costs for your banking infrastructure are already in place. And the profitability on these customers is already low.

(The bad news: Increasing your returns for shareholders, in this interest rate environment, likely isn’t going to be as easy as just charging the same customers more for the same services. Yes, you can cut costs. But at some point, it’s also going to require the hard work of great customer service and innovation.)

One other thought: those community service days you organise are good. It’s hard to argue against cleaning up parks and helping build homes. But an even greater impact could be to help with one of our country’s greatest needs by doing what you do: providing financial education and financial guidance….in this case not to the wealthy, but to struggling families. If every bank and Wall Street employee contributed just one day a year to this, the impact to low-income families could be life-changing, and the impact to our country could be extraordinary. And, check your internal employee surveys: your employees want to be part of the solution.

Let’s face it: the big banks are not one sharp advertising campaign away from restoring their reputations. Instead, the smart management teams will reframe the issue. They will fundamentally rethink how they can employ their unique attributes – their branch systems, the expertise of their employees – to tangibly improve their communities and help with the challenges those communities are facing, thus improving their own standing. While I understand the pressure of the quarterly earnings cycle (yes, learned the hard way), I’ve also seen that making long-term investments of this type can pay off surprisingly quickly