The answer is of course, yes, but, who will control this future?
There are about 300 billion transactions of $10 or less made in the United States and about 80% of those are for less than $2.
ATM, credit, debit and pre-paid cards are here today, and smart cards have an enormous potential to replace cash, which we will all see demonstrated in numerous Atlanta projects during the upcoming Olympics.
Electronic transaction cards even have the potential to add value to the checking account relationship and possibly represent a new source of fee income for banks.
With non-banks knocking at their door in almost all areas, banks cannot afford to lose control of the payment system. Electronic transaction cards may well serve as important competitive differentiators and may provide visual proof of whether the payment system is indeed still in the Banking Industries domain.
Re-Engineering Checking Account Profitability
Across the country, depository institutions are taking a closer look at checking account relationships. The need to generate fee income, coupled with the pressure to reduce costs, is forcing them to sharpen their pencils.
Depository institutions want to encourage customers to use low-cost delivery channels rather than expensive human alternatives. On the one hand, Citibank is dropping fees for electronic delivery systems. On the other hand, First Chicago is charging for teller visits. In both cases, the objective is the same.
The Key to reengineering checking account profitability is segmenting the market by product design and pricing, of which innovative products such as transaction cards may well be the secret.
Pricing Controversies - Free vs. Fees
The pressure to generate fee income is forcing many depository institutions to impose fees for services which at one time may have been free. Since 1990, service charges have grown from $11.4 billion to $15.3 billion. Industry observers believe this trend will continue.
In general, consumers do not mind paying their way, particularly as it relates to convenience and as long as they are presented as options. However, increased fees for checking account services are fodder for the media, consumerists and politicians. Unfortunately, depository institutions have traditionally given services away and failed to communicate benefits successfully.
We all continue to wait and wonder, if the Banking Industry will lead the charge toward the future, or follow.
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