Price bundling: a smart pricing strategy for banking
In September 2011, Bank of America, squeezed by the debit interchange fee cap introduced by the Durbin Amendment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, announced its intention to impose a $5 monthly fee to its debit card users (Rauch 2011 ). This brute force change in debit card pricing gave rise to a grassroots campaign (Lopez 2011 ), which quickly gained traction through social networks and caught the attention of mainstream media. Bank of America was not the only bank involved in this “debit fee fi asco”; Wells Fargo, JP Morgan Chase, Regions, SunTrust, Citibank and PNC all reportedly planned to introduce a $3-$5 monthly fee to their debit card users. As public backlash grew, a consumer protest movement called “Bank Transfer Day” (Pfeifer and Reckard 2011 ) sprang up and called for voluntary switches from retail banks to not-for-profi t credit unions by 5 November 2011. The result was that on 1 November 2011, Bank of America announced that it would cancel its plan to charge its debit card users and the other banks backed off at around the same time (Sidel 2011 ). In January 2012, Bank of America CEO, Brian Moynihan, acknowledged in the fourth quarter earnings call that the “debit fee fi asco” resulted in a 20 percent jump in account closings at Bank of America (Kim 2012 ). Meanwhile, the National Association of Federal Credit Union reported a 700 percent increase in new account openings at affi liated credit unions in October 2011, compared with the same period the previous year (FOXBusiness, 2011 ).