Payment Fee Disclosures

Welcoming Fred Gore

Sponsor Dove's Inaugural Study of Small Business Payment Preferences

What do YOU think of interchange?

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Home > On Payments Issue #15

Consumers don’t like to pay fees—but they really don’t like to be surprised by fees. To that end, financial institutions and lawmakers have put in place a variety of fee disclosure policies to ensure both consumer protection and customer satisfaction. Recently, several legal cases have provoked questions about the effectiveness of current fee disclosure methods: how well do consumers understand the fees associated with their bankcard? Does that knowledge (or lack thereof) cause them to change their behavior?

In this issue of On Payments, we share findings from a recent Dove study of more than 2,000 consumers designed to gain better insights into consumers’ awareness of payment card fees and the impact of that awareness on their payment behavior.

To sign up for an online subscription to On Payments, please click here.

Payment Fee Disclosures

How far should financial institutions go to inform their customers?

According to the Merriam-Webster Dictionary, the word ‘disclose’ has the following definition: to make known or public; to open up, expose to view. Recent legal cases have brought the issue of fee disclosures back in to the spotlight provoking questions regarding the effectiveness of current disclosure methods and what changes, if any, are necessary for improving the way disclosures are made in the future.

Financial institutions around the world have been disclosing information to customers for as long as they’ve been in business. After all, who wants their customers to be surprised? Disclosing just how much we will pay customers for their deposits or what service levels customers should expect when they walk into a branch are good things, and key elements of the value proposition that creates demand. Disclosing how much customers will have to pay, what kinds of fees they will be subject to and when these fees will be charged is not usually a positive message, but it is part of the value proposition (even if negative) that a customer uses to make decisions about where they want to take their business.

Disclosures now required by law have been a source of great debate, sometimes litigious, and the driver of significant expenditures on the part of financial institutions. Ensuring that customers are fully aware of the myriad of fees they might be subject to and under what conditions these fees will be charged is important. Customers surprised by a fee, particularly in the first few statement cycles, are more likely to shop their business than customers who are not surprised. The problem, of course, is that the complexity of fees, particularly those associated with payment mechanisms, has increased the likelihood of surprise fairly significantly. The list – ATM fees (surcharges, foreign or disloyalty fees), PIN debit card usage fees, bill pay fees, overdraft fees, currency conversion fees – is long and (at least in the history of payments) relatively new. As each one of these fees was introduced, customer responses ranged from surprise to irrelevance, with anger lurking in the shadows waiting to spring.

No business in their right mind wants surprised or angry customers, and as a result, FIs want to ensure that their customers understand all elements of the value proposition, including prices and fees. Just as importantly, no lawmaker wants their constituents surprised by fees an FI might impose, and as a result a number of disclosure requirements have been passed into law to ensure that financial institutions of all types do not have the ability to ‘spring one on the public’ without legal consequences.

To what extent have these disclosures fulfilled the intent lawmakers might have had? Click here to read the full article, and view findings from a recent Dove study of consumers’ fee awareness and its impact on their behavior.

 

Welcoming Fred Gore

We are pleased to announce the latest addition to Dove Consulting, Fred Gore.

Fred joins Dove as a Vice President focused on merchant acquiring and payments. For the last 12 years, Fred was SVP and Group Head of North American Acceptance at MasterCard. In this role, Fred managed the relationships with the members, processors, and top volume merchants that acquire transactions on behalf of MasterCard, and was accountable for increasing MasterCard’s penetration in both established and emerging merchant categories. Additionally, Fred provided consultative services to all of MasterCard’s Global Regions in support of the development of their acceptance strategies.

Fred has deep expertise in the merchant payments business, including acceptance, card usage and preference, pricing, and new payment technologies.

Fred can be reached at fgore@doveconsulting.com or at 617-357-7922.

Sponsor Dove's Inaugural Study of Small Business Payment Preferences

Every two years, Dove conducts a comprehensive study of consumer payment preferences. But how do financial institutions’ other retail banking segment—their small business customers—prefer to pay?

To better understand the dynamics of small business payments—both paid and received—Dove is undertaking a new research project.

We are currently seeking a few leading organizations to help sponsor this research. For more information, or to become a study sponsor, please contact Tony Hayes at 617-753-9212 or David Dove at 617-753-9200.

What do YOU think about interchange?

Judiciary Chairman Arlen Specter is holding a hearing today (June 28) on the fees merchants pay to accept payment cards.

Visa USA and MasterCard assert both the importance of interchange fees and their right to set these prices. Merchants point to the high—and growing—cost of accepting card-based payments, and their lack of alternatives. And the Federal Reserve has indicated that it lacks the authority to regulate interchange.

What do you think? Click here to share your views via a brief web survey. We will post the results of the poll in our next issue of On Payments.