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Establishing A Personal Banking Relationship Term Paper

Banking Models The service fee banking model is the most appealing to me, and frankly, I believe it is a model that is long overdue, an opinion that I will explain further later in this communication. A quick review of Regulation CC, Availability of Funds and Collection of Checks, leads me to believe that financial institutions have more leeway in customer transactions than is appropriate. Moreover, I believe that Regulation CC, while perhaps appropriately structured, is poorly implemented. That is to say that Regulation CC is designed to protect financial institutions from unnecessary risk generated by individual banking customers. On a customer to customer basis, the risks management provisions of Regulation CC seem excessive; it is only when one considers the absolute numbers of transactions that could conceivably fall into the Regulation CC categories that an appreciation develops for the potential risk that Regulation CC has the capacity to protect against.

The primary requirements of Regulation CC are to: 1) Make customers' funds available for withdrawal within the times that are prescribed by the regulation; and, 2) provide funds availability disclosures to customers. The primary objectives of financial institutions appear to be: 1) Protect their operations against unnecessary risk, and 2) maintain a reliable and lucrative revenue stream to financial institutions. Given that the terms of Regulation CC are vulnerable to subjective interpretation by the financial institutions, there appears to be simply too much opportunity for slippage -- for banks to be more concerned about their profit margins and shareholders than about providing service to their customers.

I prefer the service fee banking structure, primarily because it can be provided with considerable transparency -- and the fee schedules can show precisely what a customer is buying and how much they are paying for the services. Indeed, the service fee structures can reflect the actual frequencies at which...

This model is relatively new and is currently referred to as an unbundled pricing model. This means that customers only pay for the banking service they actually use. Moreover, I do not want to pay a separate fee for online bill pay. And I am not at all excited about being able to go to the head of a telephone queue when I am holding for a bank customer service representative, if I will be charged $1.50 for the privilege. I consider the company's business to be sufficiently large to compel good customer service from the bank. What does it say about a bank that admits to having poor service by charging it customers to access better service? Perhaps the answer is to go down the block and open up an account with a credit union.
Deloitte recently conducted a survey of customers regarding their preferences for banking service models (Zein, et al., 2013). Roughly half of the customers surveyed expressed a preference for the fee-per-service model over other banking service options they were shown, including the standard monthly service fee model and the less common tiered usage plans (Zein, et al., 2013). One of the attractions of the fee-for-service model is that pricing can be structured so that high-frequency users may not be penalized when the fees are scheduled in a manner that gives a use-volume break (Zein, et al., 2013). Indeed the fee-for-service model stands in stark contrast to the currently popular integrated services model used by retail banks (Zein, et al., 2013). The integrated services model allows the bank to offer an entire constellation of services for free under one monthly fee. Often, customers can meet certain fee waiver criteria to receive the package of free services, such as maintaining a particular balance in their accounts.

In addition to my focus on monthly banking…

Sources used in this document:
References

Bharath, S., Dahiya, S., Saunders, A., & Srinivasan, A. (2007). So what do I get? The bank's view of lending relationships. Journal of Financial Economics, 85, 368-419. Retreived from http://www18.georgetown.edu/data/people/sd/publication-7506.pdf

White, M.C. (2013, February 8). Online banking: more site outages and cyberattacks coming? Time. Retreived from http://business.time.com/2013/02/08/online-banking-more-site-outages-and-cyberattacks-coming/

Zein, A., Suryanarayanan, S., Dillon, D., & Weston, D. (2013, September 9). Shifting retail bank pricing models: Managing the transition to unbundled services. Deloitte University Press. Deloitte Center for Financial Services. Retreived from http://dupress.com/articles/shifting-retail-bank-pricing-models-managing-the-transition-to-unbundled-services/
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