The Impact of Durbin and Facebook on Payments Resolutions

In the New Year, innovative fee-generating strategies and the Facebook gaming phenomenon are among the issues forefront in the mind of Market Platform Dynamics’ Margaret Weichert. She continues our Resolution Series:

Focus fees on value-added services not penalties: Banks have been very clever — some might even say cagey — about developing a complex and confusing fee structures that punish consumers for suboptimal behaviors, including low balances, late payments, over-limit credit usage and overdrafts.  Some might argue that these fees play an important role in incenting customers to “do the right thing.”  However, in light of recent legislation (Dodd-Frank, CARD Act) and the establishment of the Consumer Financial Protection Bureau (CFPB), these penalty fees are going to be completely out of fashion (think 70s leisure suits).

Banks and other financial services companies will need to develop other fee-generating strategies that are based on fee-for-service models and value-added offerings.  Some relatively straightforward examples of fee-for service concepts might include:


– Unlimited paper statements for a fee

– Unlimited teller access fees

– Unlimited out-of-network ATM access fee

– Online and mobile banking usage fees – e.g. x free balance inquiries


Value-added product and service offerings will also clearly provide opportunities to charge new fees:


Risk management & credit management services – credit protection, insurance products, FICO clean up, credit/ID theft alerts

– Information services – budgeting tools, expense management tools, portfolio management tools

Rewards programs – higher value rewards programs with more value, justifying fees

Small business services


Test many mobile marketing solutions: Merchants, processors and financial institutions should keep a close eye on the burgeoning mobile marketing solution landscape.  Over the last several years, there have been dozens of great ideas, but lackluster execution or adoption.  However, with the popularity of both Apple and Android smartphones, it’s likely that a mobile marketing “tipping point” is upon us. There’s a killer marketing app out there somewhere already, poised to take off in the next year.

Of course, the challenge with technology adoption of this sort is that it’s difficult to predict which solution will win.  Whether it’s Sony vs. Betamax or MySpace vs. Facebook, it’s typically difficult to determine in advance, which “networked” two-sided market solution will gain critical mass

Consequently, a “portfolio approach” to technology assessment and adoption is warranted.  Merchants, processors and financial institutions will benefit from working with multiple mobile marketing solution providers: from Foursquare, Groupon and Facebook Deals to ScoutMob and Visa Mobile.  Third-party mobile integrators can help make support of these solutions simple.

Take social commerce seriously: For those not already exposed to the social networking craze, it may seem easy to dismiss.  Why should any serious business person worry about these “social” sites… they have nothing to do with serious commerce, right?  WRONG.  (Related Article: Is 2011 the Year for Social Commerce?)

Whether you understand it or not, one thing is clear.  Social commerce is real, rapidly growing and extremely important from a payments perspective.  More new payment transactions are being created in these social spaces that in traditional physical world or even eCommerce retail locations

The Facebook gaming phenomenon has proven to be more than a passing phase, with more than 500 million Facebook users routinely playing games, and about 20% of that number paying cash for in-game benefits.  This has catapulted game companies like Zynga and RockYou to hundreds of millions of dollars in revenue, and $3B + valuations in less than two years.  Facebook itself is building a solid business in its Facebook credits business (mostly for gaming), poised to reach $300 million in revenue in 2011.  Still other shopping and offer programs, like Groupon and Gilt take advantages of the viral nature of social sites to drive multiple customers to adopt key offers.  This social-network-based strategy has driven Groupon to over $100 million in revenue and a $1B+ valuation.

So, as a serious business person, I need to take this trend seriously.


Payments New Year’s Resolutions



  1. Educating, Learning and Innovating: A New Year, A New Start

  3. Payments Resolutions Worth Keeping

  5. Balance, Harmony and Open Platforms