What could have prevented BofA’s colossal debit card mistake?

  • November 2011
  • Posted By Greg Garson

by Greg Garson

When you take a step back and evaluate BofA’s current situation, you could potentially have sympathy for them.  The failing mortgage business (thank you, Countrywide); the under-performing investment business (thank you, Merrill Lynch); the Durbin amendment (over $2 billion in lost interchange fees) and the Reg E (another couple of billion in lost overdraft fees) (thank you, US government).  It is hard to be the big.  Is BofA the misunderstood Frankenstein monster stalked by the town’s folk?

What is their situation? Quickly attempting to make up lost revenue, BofA hastily announced a plan to charge the very customers  who most value their debit card. But BofA over-estimated the “stickiness” of their customers’ relationships with the bank.  Their most valuable customers began voting with their feet.  Net result: an announced plan to retract the planned fees (with their tail between their legs).

What could they have done differently? Typical research techniques admittedly struggle to estimate real customer behavior change.  Even when customers display outrage, for example, their expressed reactions are often hollow threats.  However, we have learned that customers’ behavior is consistent in one area—they (eventually) treat the bank as they have been treated.  There is sage wisdom in following the “golden rule” (thanks, Grandma): “do unto others as you would wish they do unto you”.  The question is how?

One way is to follow the “Equation for Assessing Fee Tolerance”:


“Ability to charge a customer additional fees = Strength of transactional engagement with bank + strength of positive mental (emotional) relationship with bank”

BofA did not follow this approach.  They would have been charging customers that have only modest transactional engagement with BofA (neither dormant, nor a heavy debit user).  This violates Part One of the equation.  And it’s no surprise that few BofA customers fit Part Two of the equation (high reported satisfaction with the bank).  BofA simply did not understand their customers’ needs, requirements and emotional connections (disconnections) to the bank.

Before taking action, BofA needed to have built some mental space (emotional relationship) within its customers that is based on more than just anger (not an easy task).  Our research shows very strongly that customers are willing to ware quite a lot of “abuse” if they have some empathy for the organization.  While this empathy is not easy to build, it is a very worthwhile investment.  How you build this empathy differs bank-to-bank, and requires getting a very deep understanding of the different types of customers the banks have and what will drive that emotional attachment.

Lesson learned? Better to be safe than sorry.  It is better to invest in understanding your customers’ motivations, emotional connections and “tipping points” (how they will truly react), than to launch a major change and have to repeal it – a much more expensive alternative.



Leave a Reply

Your email address will not be published. Required fields are marked *