There are a lot of things to like in PNC’s move to enable checking account customers to choose which benefits have value, and to easily change their account to one which meets their needs better. According to an article published in PaymentSource, entitled “Reacting to Debit Regs, PNC Enables Customers to Pick Which Perks to Keep,” PNC has created a Supercharge button which allows customers to switch to a new checking account if they are unhappy with the changes to their current one. This puts the customer somewhat in control of their product, and instead of just taking something away (like debit rewards), it allows the customer to proactively make a decision about the proper benefits for his/her lifestyle and pocketbook. And if the various options are clearly communicated, and the operational aspects of the transition occur without hiccup, it could create a very positive customer experience.
Other banks, in anticipation of Durbin, have just taken away debit rewards, since the expected interchange will no longer be sufficient for funding the cost of those rewards. Although for the most part, banks are removing debit rewards for new DDA customers only, it is only a matter of time before it is taken away for everyone. PNC’s approach, at least, has a bit more nuance and gives more control to the customer.
But, it seems to me, that again we are back at the product-focused mentality. The revenue associated with a product has gone down (or is expected to be dropping) due to external forces. Therefore, the bank reacts, by looking at ways to maintain the margin in that product. I get it. Most banks are siloed in terms of organizational structure, objectives and systems. It’s difficult to make decisions that reach outside of the product.
However, to illustrate the potential pitfall of this approach, I’d like to illustrate a hypothetical customer situation. Let’s assume that you have a customer that is getting debit rewards, and they don’t maintain a high balance in their DDA. Let’s also assume that that individual has both lending and investment accounts at the bank that are very profitable. And to take this analogy a bit further, let’s make the assumption that if you did an enterprise value analysis this customer falls into “best customer” status. And so as a final assumption, let’s assume that debit rewards is important to this customer. So the bank, looking at the checking product only, takes away debit rewards. The customer no longer has the option for debit rewards, or potentially even has the opportunity to switch his checking account which involves increasing his balance to keep his debit rewards. He may do that…or he may leave the bank entirely, and take all of his lending and investment accounts (plus their associated profit) with him.
Of course, this is just a hypothetical. And it’s much easier to make (and implement) decisions at the product level then at the customer level. But doing so, no matter how well executed, can backfire. The product P&L will improve; the bank’s may not.
