Too Little, Too Late

The big banks may have retreated from imposing Durbin-inspired debit card usage charges on their customers, but the emotional damage may still cost them business.

Certainly, that consequence was conveyed in two of the major banking technology providers’ latest earnings calls this week.

On Fidelity National Information Services’s 3Q earnings call, Gary Norcross, chief operating officer and corporate executive vice president, told investors that community institutions were gaining new customers as a direct result of the big banks toying around with the idea of debit card fees.

From a Seeking Alpha transcript, Norcross told listeners:

“Interesting, toward the latter part of the third quarter, we saw a spike in our new account openings due to some of the fee generation tactics at the large financial institutions put in place. As you guys are aware, a lot of institutions now have pulled back on those fees. But there really — we really could see an increase of account movement to those community institutions. And obviously, that benefits us because we do so much outsourcing in that space, we’ll get increases and account volumes on the core banking side on our Payments businesses.”

Though Fiserv Inc. didn’t spell out the message quite as directly as FIS, its call conveyed similar undertones. In the Q&A, Jeffery Yabuki, president and chief executive, told listeners:

“It was our belief that the kind of actions that were being taken will be difficult for consumers to swallow. But there are a lot of other reasons why people might be switching between institutions. So I don’t think we have a hypothesis that is something that is being driven by Durbin. Our community banks – so speaking for our clients, that they would say that this is kind of noise in the market was a good thing and is a good thing for them, and they did expect to see clients migrating to them and saw this as an opportunity to grow.”

In responding to another question, Yabuki went on to say that debit card usage should still stay strong, and the power of consumerism is ruling the roost right now:

“We have been fairly consistent in our view that we believe that debit was a trend that was not going to be stopped by the virtue of fees being assessed. And then we have seen obviously some reversals of those kinds of actions coming. And we believe that, that – either consumers would decide to switch institutions or they would look at other ways to continue to use their debit cards. So we’ve been pretty positive on that all along. That was not necessarily a popular position, but we do think that we’re going to continue to see strength in debit. One of the things that we are actually very encouraged by is on Investor Day, we talked about one of the key market trends being that of consumerism and really having consumers have power to influence organizations to deliver the kinds of products and services that they want. And whether it’s debit or a fully functional mobile application or a new wave of internet banking or P2P payments or whatever it may be, we do believe that what you’re seeing in the market right now is a direct relationship or a direct result of consumerism.”

Both of these earnings’ nuggets underscore consumers’ big bank backlash toward debit cards fees, which is only heightened by the cross currents of Occupy Wall Street and Bank Transfer Day coming up. Like I blogged in an earlier post, what it all boils down to is there’s a sizable number of consumers fired up from their usual state of banking apathy, and big banks should especially stay tuned to their sentiments. Just as Netflix misstepped in its business plan redo, so too have the big banks.