To Fee or Not to Fee: For Bank of America, That Is the Question

Rising banking fees are the norm these days, as banks attempt to make up revenue lost to new regulations and teensy net interest margins. One megabank, however, has postponed instituting new fees on checking accounts: Bank of America (NYSE: BAC  ) .

Once burned, twice shy
You may recall the $5 debit card fee fiasco last November, whereby public outcry caused B of A to backtrack on that particular plan to goose revenue. Perhaps unfairly, Bank of America is remembered as the heavy, although other banks such as JPMorgan Chase (NYSE: JPM  ) , Wells Fargo (NYSE: WFC  ) , and Suntrust (NYSE: STI  ) were also in various stages of implementing the same type of charge. They were able to quietly bury their plans, while B of A and its CEO, Brian Moynihan, became the targets of widespread criticism.

Well, Mr. Moynihan may have trouble remembering some things, but he hasn't forgotten that drubbing. Instead of levying fees this month that might have affected 10 million bank customers, B of A has elected to put off these changes for at least a year, according to the Wall Street Journal. While this seems wise, considering the brouhaha of last year, it also restricts the bank's choices when it comes to bumping up revenue. Mr. Moynihan, however, has a plan.

Mobile banking to the rescue
Bank of America has been taking a look at its retail banking section, probably as part of its Project New BAC initiative. The bank has been at the head of the pack when it comes to mobile banking, and that's where Moynihan would like to see the new revenue generated. The bank is losing money on customers who use only one banking product and is looking for ways to interest them in a more active relationship -- while saving itself some money at the same time.

The mobile initiative should fit in perfectly with these light-use customers, since mobile banking is in demand, particularly with the young and the underbanked. Many young, upwardly mobile customers are especially fond of tablet banking, another area where B of A excels.

One Fool's take
This plan sounds like a winner, with both its focus on mobile and the sensitivity the bank is showing toward the annoyance customers feel with rising fees. Bank of America levies its share, but as the WSJ Deal Journal points out, so do others. JPMorgan charges a whopping $12 each month for a checking account that doesn't maintain a minimum balance, and Wells charges $7. PNC Financial (NYSE: PNC  ) has even instituted a $25 fee to close an account.

It's true that customers hate fees, but investors love revenue -- and, with this new initiative, it looks like Bank of America has them both covered.

Bank of America certainly has its slip-ups in the customer service area, but is dedicated to fostering new relationships as it moves forward in this post-crisis world. To learn more about the most talked-about bank out there, check out our in-depth company report on Bank of America. The report details Bank of America's prospects, including three reasons to buy and three reasons to sell. Just click here to get access.


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