The Bankwatch

Tracking the consumer evolution of financial services

Banks’ use fees for customer behaviour modification | Cap Gemini

Cap Gemini have a 2007 review of Banks fees.  Please note that its co-sponsored by ING, the no fee Bank.

The average fee is €77 but the thing that stands out as it did in previous reports, is the North American picture.  North Americans pay through the nose for banking – no doubt there.  Asia is cheapest, and Europe has the narrowest distribution (least competition?).  Hat tip to Chris Skinner for this one

Full report is here.

But as usual the devil is in the details.  In terms of homogeneity, five countries have the least differentiation:

Austria          6%

UK                5%

Canada        10%

Japan            9%

South Africa   9%

I expect Canada is slightly higher because of ING.  The other Banks are extremely similar.

Where it gets really interesting is how charges are distributed across types of fees.

Fee types are defined:

Account Management – account fees

Cash Utilisation – ATM, deposits at desk

Exceptions – stop payment, document search

Payments – cheques, debit card, credit card etc

If I was a Canadian politician, I would be all over this, relative to ATM fees. 

Finally the conclusion, which is quite interesting – Banks are using fees to promote behaviour change rather than fee revenue. 

Conclusion – extract

Our results indicate that pricing strategies for day-to-day banking are less means banks are using to increase revenues than a way to change consumer behaviour. Banks naturally want consumers to move towards the most cost-effective solutions, encouraging them to use remote channels and discouraging their use of desk operations and branches in general. Banks in the eurozone typically price in a much narrower range than banks in the other regions surveyed. And the trend towards convergence is confirmed.

In the SEPA (or eurozone) area, prices for electronic payments decreased by 3%, but are still 21% higher than in the rest of the world. Since the SEPA effort is promoting transparency and convergence, retail banks are likely to continue to reduce prices for electronic payments products.


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Written by Colin Henderson

April 1, 2007 at 22:12

Posted in Profitability

One Response

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  1. The last point regarding banks using fees to promote behavior is an argument I have had with numerous financial institutions in Australia. It is interesting that this conclusion is being drawn by more and more consultants. I will definitely be bringing this up next time I see them to see what they say.


    April 2, 2007 at 18:27

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