If it seems that banks are charging more for the services they provide, bankers in Mississippi say that isn’t the case in the Magnolia State. This may be one of those times when it’s an advantage to live in a rural state.
Dr. Ken Cyree, associate professor of finance at the University of Mississippi, says it’s true that banks in big cities are raising fees. He even knows of a bank in Chicago that charged customers every time they came into the bank. Needless to say, he points out, that fee was very unpopular and that bank lost two-thirds of its customers.
“That sort of thing would not happen in Mississippi where banks cultivate personal relationships with customers,” he said. “It’s not true that banks here are raising fees. I would argue that the trend is more in the other direction — to charge less fees.”
Cyree, who is also director of the Mississippi School of Banking at Ole Miss, says the competitive pressure of banking keeps fees down. He feels that if a bank gets way out of line with fees, it tends to bring them down.
“I do not see a widespread problem regarding fees at all in Mississippi,” he said. “You can find a few pockets of rising fees but generally the banks are in line with everyone else.”
The professor, who taught at the LSU Graduate School of Banking before affiliating with Ole Miss, said he even sees banks starting to compete for accounts with no fees, like free checking for minimal deposits, direct deposit and student accounts.
Mississippi Bankers Association (MBA) president Gene Walker says there’s not an increase in fees as much as banks offering additional services and charging for those services.
“Banks are looking to diversify and offer more,” he said. “We own an insurance agency and many banks do. We’re putting more emphasis on non-net interest margin products which would be service fees.”
Walker, chairman and CEO of the Bank of Forest, feels banks have run through a cycle of raising fees to increase profits and is pleased with the federal act to give everyone an equal playing field. He agrees with Cyree that the business is more competitive than it used to be.
Huey Townsend, chairman and CEO of Guaranty Bank & Trust Co. of Belzoni and vice president of the MBA, said, “I haven’t seen fees raised even though banks aren’t earning as much on interest. We haven’t raised service fees in years, but we’re getting into more areas to generate more income.”
The Peoples Bank of Biloxi CEO Chevis Swetman said, “Banks are definitely earning less interest and are looking for more explicitly priced services rendered. We’re seeing pricing sectors fragmented and offering more.”
Traditional banks are losing money on fees even though customers are paying them $20 billion per year, says Dr. Frank Hood, professor of banking and international economics at Mississippi College. He says it costs a bank $20 to $25 to process a bounced check and $4 for automated teller machine transactions.
“Historically, banks got 5% of their money on fees,” he said. “That’s not true today. What we’ve been seeing from the Fed is that banks are losing on retail service costs and probably not netting as much as they did 10 to 20 years ago. They used to make good on fees but today it’s questionable.”
A banking professor since 1967, Hood says banks that are doing well are tied to e-commerce and are not making a return on fees because the old way of doing business is costing more.
“They will have to be more competitive with e-commerce. That will be more lucrative and more controllable for them as more customers find it easy to do their banking from computer terminals.”
Hood said students want to know when there will be a checkless society for speed and convenience. “Checking accounts are not sacred to banking. They began in 1863 and grew to the point that we write billions of dollars of checks per year,” he said. “Banks found they could make more money if they got the customers to print their own checks and that’s what they do.”
The professor says there is no international system to handle it now, but banks will someday have bounceless checks due to instantaneous check clearing.
“Merchants will love it,” he said. “Money will immediately move from the customer’s account to the merchant’s account.”
Derek Caswell, product manager in the marketing department of BancorpSouth, said the banks in that system are conservative on fees and are able to learn lessons from national banks. “National banks are usually the ones to take the first step on raising fees, and that’s good for us because we can look at that and see that consumers did or did not like something,” he said.
Contact MBJ contributing Lynn Lofton at firstname.lastname@example.org.