One of the comments being heard from many bank customers over the past several months is that they’ve experienced a noticeable drop in the service they receive from their bank. The reason for this is somewhat understandable–banks are under a tremendous amount of pressure as more banks are failing essentially every week. You could argue that a time like this would call for improved customer service, but banks seem preoccupied to many of their most loyal customers.
There are several areas where banks are under a significant amount of pressure right now. Here are some of the issues facing banks:
- FDIC Is Running Out Of Money: With 95 bank failures in 2009, FDIC insurance has been called upon many times this year to cover the deposits of bank customers. The fund is not an unlimited pool of money though and it’s not accustomed to such a rapid succession of bank failures. To solve the problem, the FDIC wants banks to prepay fees for the next three years to build the fund back to $45 billion. The problem for banks is that this solution means coming up with three years worth of fees when they are already strapped for cash. The FDIC has the option to approach the Treasury for funds as well, but they are choosing to seek funds from member-banks first.
- Pressure to Make Loans: Even though the recession seems to be approaching its end, the credit crunch is ongoing from the standpoint that it’s difficult to get a loan. Banks have money now from TARP funds and from raising capital on their own, but they’re hoarding that cash more than they’re lending. Major banks are now being forced to report their loan portfolio activity, creating more pressure to make loans even if few qualified borrowers are seeking financing.
- Capital Strength: Approximately 500 banks received TARP money and of those banks, less than 50 have repaid the taxpayer loans. In addition, the stress test results forced several large banks to go to the capital markets and increase their cash on hand in case of continuing defaults. Add to this the fact that mortgage defaults and credit card defaults are still expected to increase for the foreseeable future and it’s easy to see why banks would rather sit on a mountain of cash than add liquidity to the credit markets.
- Public Perception: A factor that will take years to repair is the simple idea that the public feels that their money is safe in a bank and that the bank is concerned with more than just generating profits. There is disdain for banks that get to borrow money from the Fed at an interest rate of 0% and then turn around and charge credit card customers interest rates above 20%. Banks will need to work hard to regain the trust and loyalty of their customers.
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In an ironic twist, banks now find themselves feeling pinched because of the fees associated with the bailout funds they received and they’re asking the government to reconsider those fees. According to the terms of the loans given to banks, they must be repaid with 5% interest, regardless of how long the loans are outstanding. The American Bankers Association sent a letter to the FDIC and the Treasury asking for the 5% interest expense to be lifted for banks repaying the personal loans early.
Bank customers have historically been the ones complaining about fees. Consider the following fees that have become accepted practices in banking:
ATM Fees: The cost of making cash withdrawals from an ATM machine that is not tied your bank can be substantial. Over 99% of banks charge at least some kind of fee for non-bank customers to access cash. The fee is typically $1.50, but ranges to as much as $3 with some banks. Your bank probably charges a fee on top of the fee you paid at the ATM machine, meaning that bank customers often pay more than 10% for the privilege of making a small withdrawal.
Overdraft Fees: More than 75% of banks automatically include overdraft protection on customer accounts. This means that the bank will honor checks and withdrawals even in you have insufficient funds, and then charge you a fee that is on average about $27. According to a recent study, these fees are incurred either during point of sale transactions or at ATM machines about 80% of the time. It would be easy for banks to inform the customer that they are overdrawn and that they will be expected to pay a fee if they complete the transaction, but most banks choose not to disclose that information to customers. Overdraft fees are big business and easy money for banks.
Credit Card Fees: Banks commonly charge an annual fee to each credit card holder, as well as fees for things like late payments and cash withdrawals. These fees add up and are a major concern when they come on top of interest charges and changing terms and conditions on credit cards.
You probably pay most of the above fees regularly and just consider them a cost associated with banking. These fees are steep and in many cases unfair, yet banks are rarely flexible in forgiving these fees for customers. To see banks now complaining about the fees that they’re being asked to pay to taxpayers, without whom many banks would be out of business, is ironic to say the least.
So far, there has been no response from the Treasury or the FDIC.
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24 Mar ATM Machines Becoming a One Stop Shop
Over half of the adults in America visit an ATM machine at least once a month, and more than 40% report that they visit ATM machines at least 10 times each month. There are more than 2 million machines worldwide. ATM machines have been a part of the banking industry for almost 40 years, but they are making an increasing number of services available as technology improves and bank customers become more accustomed to using automated machines. ATM transactions are not limited to banking anymore.
People are using ATM machines today for so much more than just withdrawing or depositing cash. You can now buy stamps at many ATMs, transfer funds between accounts, pay bills electronically, purchase gift cards, and much more.
Some banks have gone the extra mile in making non-banking goods and services available through their teller machines. Wells Fargo, for example, has been selling stamps from their ATM for the past 16 years, and they are currently the sixth highest distributor of stamps in the country. More recently, Wells Fargo has made tickets to concerts, amusement parks, and other attractions available through their machines. Although these services are not used heavily yet, their availability combined with customers becoming more comfortable with the technology could lead to more substantial sales in the future.
The number of services available through ATM machines is sure to continue growing. The trend is good for both customers, who appreciate the ease of use, reliability, and trustworthiness of ATM machines, and for banks, which can charge fees on each available service.
Although ATM machines have come a long way in the past few years, the sky is the limit when it comes to the services that could become available. Teller machines will eventually have the ability to target advertising and suggest services to customers based on their past transactions and even based on recent purchases made with debit cards. In an era when people are looking for convenience, the evolution of the ATM machine is a great example of what is possible in today’s business and banking environment.
