Embrace fee transparency, proactivity & innovation to solve those bankers’ blues

May 8, 2015 Bonnie Ton

In a low-rate, flat yield curve environment, the temptation can be strong for banks to boost fees as a way to sustain earnings growth.

Banking Relationship Management solutionsUnfortunately for the Royal Bank of Canada (RBC), their recent round of fee increases thrust them into the limelight in April as it provoked the ire of its clients. There are a number of things RBC could have done differently to achieve a different result. Chief among them was increasing the transparency of not only the reason for and nature of the increases, but also potential benefits introduced.


What happened

On March 31st, RBC announced a series of fee increases that would become effective June 1st. The increases applied to a number of transactions and accounts, but among the least popular (and most loudly declaimed) was the introduction of the following:

  • New fees (previously free) of $1 – $5 for making payments on RBC mortgages, loans and credit cards, and for making contributions to RBC investment products.
  • An increase from age 60 to 65 to be eligible for seniors’ rebates.
  • Inclusion of the “Leo’s Young Savers account” in the fee increases.
  • Requirements to obtain monthly account fee discounts were increased.

The reaction was swift and boisterous, with all the major Canadian media covering the story with varying degrees of frothiness. CBC published under the headline, “New bank fees target kids’ accounts and allow ‘double-dipping,’ say customers.” The Globe & Mail suggested RBC left “no stone unturned” and the Star stuck to the facts: “Royal Bank to raise some fees.”

It didn’t have to be this way.


“I hate giving good people bad news”

Banking relationship management solutionsSo said the Oracle to Neo in The Matrix. In that pivotal scene, Neo learns (spoiler alert) that to save the human race he is fated to choose between his own life and that of his friend and mentor, Morpheus.

While bank fees aren’t really life or death matters, in a marketplace conspicuous for its relative lack of banking competition and exceptional banking profits, every increase will be scrutinized.

For this reason, it is important that banks consider the following when considering fee increases.


Be transparent about what is going up, but help give context.

Positioning the fee increases as a way to keep pace with the inflationary cost of servicing a very expensive infrastructure can help customers understand that while transactions seem frictionless and therefore, costless, they aren’t.

Banks also have the opportunity to place the increases in the context of how big an impact they will likely have on the average customer. In this case, RBC responded to the uproar ex-post by noting in an email to the Financial Post that “80 per cent of its clients ‘either receive no-fee or rebated banking.’” Getting in front of the furor with facts like these could save headaches down the road.


Help customers understand how they can avoid or minimize fees.

One of the quickest ways to defuse an angry response is to dissipate confusion and provide valuable advice to clients. With a banking relationship management system like Zafin’s miRevenue in place, banks can target an appropriate message to each client that identifies how fees will affect them directly based on their account type, number of banking products, and account activities.

  • “Thirty-something who regularly uses six debit transactions a month? Ignore this whole letter.”
  •  “RBC mortgage-holder with a credit card and a monthly auto-contribution set up for your RRSP? You should consider upgrading to a premium account as it will save you x dollars a month going forward.”
  •  “Very frequent debit transactor? Consider getting an RBC Avion credit card and pay it off each month. Collect Avion loyalty points and only use one debit transaction per month, to pay it off. Add a $500 TSFA and get an additional monthly discount to your account fee – to free if you have a Day to Day Banking account.”

Putting the effort into showing you know the depth of the relationship with your client – and that you want to help them minimize the erosion of fees on their savings – can go a long way.


Offer something new

Beyond helping clients interpret the changes in the context of their historical experience with the bank, offer something new and value-added that will help them manage their fee incursion. miRevenue can also help banks track individual account activity so that they can provide “alerts” to users when they are approaching or reaching their monthly maximum debit count.

Again, by investing in innovation that is client-centric, you can demonstrate through action that the relationship is important to you and that the fee increase is not just a Humungous Bank cash grab. Because in the end, profitable growth can be mutually beneficial. And nobody has to die.    


Zafin’s Banking Fee Transparency solutionsTo learn more about Zafin’s Fee Transparency solutions, download this brief “Fee Transparency 101” piece. 
Relationship Banker Journal




To tap into more of Zafin’s thought leadership, check out our monthly product and pricing lifecycle journal, Relationship Banker.

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