Do you think banks process transactions first-come-first served? Think again. Opportunity!
In yesterday’s USA Today a columnist noted that banks have taken to the practice of clearing transactions from the highest to the lowest dollar amount, rather than in the order they arrive for processing (USA Today, Tuesday, September 25, 2007 page 3B). The purpose? According to the banks, it’s to make sure that big bills such as mortgages, get paid in a timely way. A second-order consequence, should an account holder go into deficit, is to be able to charge more fees for lots of smaller transactions that come in behind the larger ones. For the same amount of overdrawn money, in other words, a cardholder will pay more in fees simply by the way that banks structure their processing! That surprised me.
It also got me thinking about how few people are probably aware of this, particularly the younger or less well-off people who are hurt most by fees and most likely to incur them.
Here’s a beautiful situation for a .forward-thinking financial institution to make some strategic headway. Step 1: Create awareness of this practice among competing banks. Step 2: Show customers how your bank can help you, either by not engaging in this practice or by helping you avoid trouble even if they do; Step 3: Emphasize how much better your solutions are, thereby possibly pushing fees that consumers tolerate from the ‘tolerable’ category for customers into a dissatisfier or even an enrager. It could be one of the cases in which simply removing a negative can gain you as much strategic headway as accentuating a positive.
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