Banking Apps: To Fee or Not to Fee?

More financial institutions are considering a change in their mobile banking strategies. US Bank, Regions Bank and Wells Fargo have already started charging upwards of fifty cents for consumers to deposit checks from their mobile devices.?In an interview with Fox news, Neil Weinburg of American Banker and John Ulzheimer of SmartCredit.com argue whether it makes sense for these banks to pursue fees when it’s so wildly unpopular. Ulzheimer says they don’t need to charge fees, they do it “because they can.”

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This isn’t a new argument. Banks have been concerned with monetizing their mobile offerings since the beginning, but the consensus has always been against fees. The investment in mobile offerings is usually repaid through cost savings and cross-selling within the app. How much savings? A new study by Javelin found a mobile banking customer is worth approximately $28.38 per annum, and added up across the industry the savings amounted to $1.5 billion. The bottom line: banks should be concerned with incentivizing their customers to use mobile offerings for the sake of cutting costs, rather than using it as a channel for more fees.

?Financial institutions that learn to leverage the power of the technology are likely to experience significant growth. – Mary Monahan, Javelin Strategy & Research

So what’s new

During a panel at the Mobile Banking & Commerce Summit this year, Regions Bank defended their right to charge fees with a “value-added” approach. They charge standard fees to remotely deposit checks starting at fifty cents, then goes up from there depending on how fast the customer wants it deposited. After the launch they discovered nearly a third of people opted for immediate (for $5) or overnight (for $3) deposits, rather than the standard option. They claim customers are generally happy to pay a little extra for the new value Regions created. On the horizon, they plan to introduce more fees for things like extending the daily amount you can deposit from your mobile device up to $3000.

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American Banker Survey (JUNE 2013)

With so many banks that offer “no-fee” mobile banking, it’s hard to justify the case for fees. Regions bank experienced grumbling from customers about their mobile policy, but they say it’s just the “very vocal minority.” True, people hate fees and love to make a racket, but how many future customers are now being shooed away to banks like Citi that don’t charge mobile fees?