Continuing Pressure on Earnings Forces Banks to Look for More Fee Income

Simple Fee Income Solutions

The best new source of fee income for most banks is to simply collect fees that are already contractually agreed upon.  Whether late fees, NSF charges, or charges for special services like research, it is likely you have published fees for many services (if not, we have to have another discussion) The key is to identify the potential, by assessing your waive/charge ratio on current fees, and begin enforcing the collection of fees across the board.  

Employee education is a key here.  Realize that banks have given so much away for so long, that your employees, who have to face customers and deliver what is sometimes bad news, will feel they are in a bad spot.  It's important to talk to them first, and provide some training as to how to handle and resolve customers concerns.  Role playing is often useful in this situations.

I wanted to address a couple of specific areas, to encourage you to work on fee income strategies for the coming year:

NSF and OD Fees

Recent legislation has somewhat impacted this area, but customers have responded in such a way that indicates they are still more than willing to pay fees for NSF situations.  The value, in terms of having the check paid, and avoiding the hassle and embarrassment of a returned check (not to mention fees on that end) are apparently worth the effort.  So, stop waiving fees when customers protest.  Instead, prepare employees to speak to the value of the service rendered.

Loan Late Fees 

Loan officers, especially on commercial accounts, will often waive fees in the name of “the relationship” and only when held accountable will this stop.  Unless the bank has made a mistake, these fees are contractually allowed and should be charged.  A common method of addressing the waive issue is to force commercial lenders to disclose and defend any waived fees publicly, perhaps in your loan or management meetings.

On consumer loans, collecting late fees should be a matter of course, unless (again) the bank has made a mistake.

Special Services

Even with today's sophisticated imaging systems, research can be a time consuming task, when all aspects, including packaging and delivery, are included.  It is thus important to charge a fair price for this service.  I suggest the fee per hour include the employee's hourly rate, doubled, to account for the opportunity cost of the employee engaged elsewhere, plus a reasonable markup to cover costs and provide revenue.  Fees for services that the bank also incurs a hard fee for, such as wire transfers, ACH processing, even expedited bill pay services, should reflect the bank's cost, plus a markup for overhead and handling.  These are fair and easily explained charges, and employees should be counseled to sell the value rather than commiserate with customers who complain.

These are just a few ideas to get you going. It is important to communicate the significance of non-interest income to your staff,  put policies in place to enforce the collection of fees, and provide training and support to employees as they strive to enforce these policies.  Let me know if you need help.  Email me: trent@trentfleming.com