American Banker reported yesterday that Bank of America will launch an online and in-branch advertising campaign called “A little knowledge is a powerful thing” to educate consumers about banking and credit card fees. The article calls the campaign “ironic” since more than half of BofA’s revenue comes from non-interest income. Bruce Hammond, president of BofA’s card services division was quoted as saying:
“Our research shows that if we equip consumers with this account information, they become more empowered to manage their finances and more satisfied with their banking experience.”
My take: This is a bold move — and great marketing — because it demonstrates:
1) Transparency. I’ve argued before that the way to win over financial services customers is by demonstrating customer advocacy (versus worrying about whether or not they advocate for the firm). Transparency — being open about fees and rate structure — is an important component of being an advocate for the customer.
2) The importance of customer engagement. Engagement isn’t about how long someone looks at your ad (sorry, branding folks). It’s about the emotional connection someone has with your brand or firm. BofA’s move will help engage consumers more deeply with managing their financial lives — an important step to becoming engaged with BofA itself.
3) Long-term thinking. Is BofA putting some of its fee revenue at risk? Possibly. But they’re betting that by delivering on points #1 and #2 (transparency and engagement) that it will win out in the long-run. Many industry observers (myself included) have long criticized financial institutions for taking the short-term view towards building profitability. BofA’s move clearly displays long-term, strategic thinking.
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I hope that they’ve reviewed all fees before “marketing” the info. Whilst this move is to be welcomed, it could backfire if any of the charges appear to be “unfair” to customers. Assuming all the charges & fees are reasonable then great. I fear that there will be a few headaches before the other banks get it. BOA will need to hold their nerve if there is pushback – esp if other banks don’t follow.
I wouldn’t be surprised if BofA expects that other banks WON’T follow suit. It’s a way for BofA to differentiate itself. I can also imagine that the firm anticipates regulatory action down the road, and is getting ahead of that curve.
Depending how they do this, it could lead to the thing Banks have resisted which is comparing rates, and features. Comparisons is what online consumers seek, and this would enhance BofA’s reputation.
While it could possibly shine the spotlight on the negatives associated with fee income, I would say that this initiatve definately has the potential to differentiate B of A over the long term from much of its competition – many of which take pride in their fee income structures.
This month’s Harvard Business Review features a good article which touches on this topic – “Companies and the Customers Who Hate Them” which highlights retail banking as an example of an industry where companies are encouraging customers to make mistakes as means to drive profits.
Colin: Good point, and I think that remains to be seen. I think BofA is betting on improving the customer experience — after the card decision has been made — and on preempting any regulatory actions that would require it to do this.
Brady: Thanks for your comment. Added your site to the blogroll.
While I applaud any movement towards greater transparency in this industry I worry that it is a feigned move so that they can say they are doing something with actually having to make real reform. The Hill is actually doing hearings on this issue today and I believe that we really need to take a harsh look at any industry that makes a large part of their profits through fees and charges that most consumers aren’t even aware of like interchange fees and rates that can change without the knowledge of the consumer. A group that I work with http://www.unfaircreditcardfees.com is doing a lot to help raise awareness, and they have a lot of good details on this issue. I also agree that it remains to be seen what will happen in the end, but forgive me if I am withholding my optimism.
Sounds to me like B of A may have read The Ultimate Question – Driving GOOD Profits and True Growth by Fred Reichheld. Banks are so guilt of bad profits. Those made at the expense of a customer relationship (charging a fee to talk to a teller comes to mind).
Can’t wait to see how this plays out……
Its hard to believe that is will play out well for us or small businesses if banks and credit card companies continue their current practices. Denise, I agree that the fees they try to charge us are ridiculous and a customer relationship is now nowhere near as important as their profits. There has been some news coverage about how there is a need for greater clarity on the rates and how they can change with no or little notice given, but I think its really just the tip of the iceberg.