Dear,
One of the main complains that consumers have about their bank is its fees policy.
When the customer is charged with fees, he requests to talk to a banking representative about it, he tries to get the fee reversed; and if this is not possible, he wants at least a reasonable explanation of the logic behind it.
On the other hand, management of fees is becoming a part of the bank’s revenue, particularly as very low interest rates and slow economy are making challenging for many financial institutions to improve their bottom line.
Banking fees had climbed every year since 1942, when the FDIC started collecting the data, and since then have been an important part of the relationship between the customer and his bank.
But this is going to change in the oncoming years, or at least this is the tendency we can see from a recent study of the US Federal Deposit Insurance Corp which shows that banking fees have dropped nearly 21% to $32.5 billion last year from $41.1 billion in 2009
http://www.marketwatch.com/story/bank-fee-income-in-decline-for-first-time-since-1940s-2014-09-03
What are the causes of this tendency change?
Mainly two reasons, new regulation and changes in market behavior.
For instance, Dodd-Frank establishes that the amount of any interchange transaction fee that an issuer may receive or charge with respect to an electronic debit transaction shall be reasonable and proportional to the cost incurred by the issuer with respect to the transaction.
http://www.icba.org/files/ICBASites/PDFs/DoddFrankActInterchangeProvisions.pdf
In addition, mobility paradigm provides customers with instant access to their bank balances from computers and smart phones making them less likely to spend more money than they have in their accounts, and consequently reducing overdraft fees.
In fact, the Fed released a survey in March showing that the most common use of smartphone banking apps is checking balances and tracking transactions.
http://www.federalreserve.gov/econresdata/consumers-and-mobile-financial-services-report-201403.pdf
But reduction on Banks profits for fees are just the first sign of something bigger, technology is changing the rules of the game, and new, better positioned players, are ready to get their part of the cake.
New players like Paypal, Google, Amazon,Apple or Alibaba are integrating Financial Services in their online platforms, and challenging the traditional Banks position in the market.
The dominant position of these companies in the Internet provides them with a competitive advantage which is growing with the introduction of new technologies like Near Field Communication.
http://en.wikipedia.org/wiki/Near_field_communicationhttp://www.reuters.com/article/2014/09/04/us-apple-iwatch-idUSKBN0GZ2A820140904
A good example is Apple, which with Apple Store and ITunes, possess one of the biggest databases of Credit Cards in the world, capitalizing the market knowledge provided by it for promoting their own payment methods is a matter of time.
http://www.bloomberg.com/video/apple-s-iwallet-can-be-new-creative-leap-sculley-_KSwAkmQQ5utfiwTu9XPdg.htmlhttp://www.cnet.com/news/how-an-apple-iwallet-might-work/
What SAP Banking can offer in the new scenario?
SAP has the know-how for tracking and analysing profits and costs for services, including multidimensional Profits and Loss Analysis, Activity
Based Costing, Services Product Costing, etc.
This know-how has been incorporated to the SAP Banking business suite, including SAP Bank Analyzer which is fully integrated with the traditional profits and costs tracking solutions of SAP ECC (Management
Accounting).
I have been working recently in some projects with strong requirements in fees analysis and customers profitability,
I’ll give you some details about them in a future post.
Looking forward to read your opinions.
K. Regards,
Ferran.
One of the main complains that consumers have about their bank is its fees policy.
When the customer is charged with fees, he requests to talk to a banking representative about it, he tries to get the fee reversed; and if this is not possible, he wants at least a reasonable explanation of the logic behind it.
On the other hand, management of fees is becoming a part of the bank’s revenue, particularly as very low interest rates and slow economy are making challenging for many financial institutions to improve their bottom line.
Banking fees had climbed every year since 1942, when the FDIC started collecting the data, and since then have been an important part of the relationship between the customer and his bank.
But this is going to change in the oncoming years, or at least this is the tendency we can see from a recent study of the US Federal Deposit Insurance Corp which shows that banking fees have dropped nearly 21% to $32.5 billion last year from $41.1 billion in 2009
http://www.marketwatch.com/story/bank-fee-income-in-decline-for-first-time-since-1940s-2014-09-03
What are the causes of this tendency change?
Mainly two reasons, new regulation and changes in market behavior.
For instance, Dodd-Frank establishes that the amount of any interchange transaction fee that an issuer may receive or charge with respect to an electronic debit transaction shall be reasonable and proportional to the cost incurred by the issuer with respect to the transaction.
http://www.icba.org/files/ICBASites/PDFs/DoddFrankActInterchangeProvisions.pdf
In addition, mobility paradigm provides customers with instant access to their bank balances from computers and smart phones making them less likely to spend more money than they have in their accounts, and consequently reducing overdraft fees.
In fact, the Fed released a survey in March showing that the most common use of smartphone banking apps is checking balances and tracking transactions.
http://www.federalreserve.gov/econresdata/consumers-and-mobile-financial-services-report-201403.pdf
But reduction on Banks profits for fees are just the first sign of something bigger, technology is changing the rules of the game, and new, better positioned players, are ready to get their part of the cake.
New players like Paypal, Google, Amazon,Apple or Alibaba are integrating Financial Services in their online platforms, and challenging the traditional Banks position in the market.
The dominant position of these companies in the Internet provides them with a competitive advantage which is growing with the introduction of new technologies like Near Field Communication.
http://en.wikipedia.org/wiki/Near_field_communicationhttp://www.reuters.com/article/2014/09/04/us-apple-iwatch-idUSKBN0GZ2A820140904
A good example is Apple, which with Apple Store and ITunes, possess one of the biggest databases of Credit Cards in the world, capitalizing the market knowledge provided by it for promoting their own payment methods is a matter of time.
http://www.bloomberg.com/video/apple-s-iwallet-can-be-new-creative-leap-sculley-_KSwAkmQQ5utfiwTu9XPdg.htmlhttp://www.cnet.com/news/how-an-apple-iwallet-might-work/
What SAP Banking can offer in the new scenario?
SAP has the know-how for tracking and analysing profits and costs for services, including multidimensional Profits and Loss Analysis, Activity
Based Costing, Services Product Costing, etc.
This know-how has been incorporated to the SAP Banking business suite, including SAP Bank Analyzer which is fully integrated with the traditional profits and costs tracking solutions of SAP ECC (Management
Accounting).
I have been working recently in some projects with strong requirements in fees analysis and customers profitability,
I’ll give you some details about them in a future post.
Looking forward to read your opinions.
K. Regards,
Ferran.
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