While the Dodd Frank Congressional Finance Reform legislation created new regulations designed to protect consumers better than ever, it also cut off profitable lines of business for banks in the process. As a result, the nation’s largest banks have resorted to new ways to maximize their revenue, at the expense of their customers.
Bank of America (NYSE: BAC), the largest bank in the U.S.has been pressured by U.S. regulations limiting debit-card and overdraft fees, and is set to give its retail customers a choice: do more financial transactions through the company, or pay a monthly fee. Joe Price, the head of the firm’s consumer-banking operations noted that the firm will offer clients a choice of four new accounts where users pay fees unless they keep minimum balances, make regular deposits, use credit cards or take advantage of online services. Bart Narter, a senior banking analyst at Boston-based consulting firm Celent commented that“You can pay with cash, or you can pay with behavior. They’re restructuring their pricing to deal with the new realities.”
The challenges facing the banking industry may be best explained by JPMorgan Chase (NYSE: JPM) CEO Jamie Dimon, when he said in July “If you’re a restaurant and you can’t charge for the soda, you’re going to charge more for the burger.” With the new regulations set to take hold, the banks have been forced to change their business models, and will need new ways to generate revenue. Although unpopular, they are necessary for the firms to survive in this new environment.
