After a mass exodus of fed-up customers following the debit-card fee debacle last fall, some banks are hoping to woo back business or at least keep existing customers by reintroducing debit card rewards.
Bank of America, the nation's second largest bank, launched a beta version of a new service Wednesday called BankAmeriDeals that allows customers to rack up savings from their favorite stores based on their spending patterns, Reuters reported.
Here's how the program would work: Say a BofA customer shops at a certain women's clothing store often. Based on that spending activity, when the customer logs on to check her account balance, Bank of America might offer her 20 percent off at that store the next time she shops. She would select the deal and make a purchase—at full price—at the store using her Bank of America debit or credit card. The value of the discount would then be automatically credited back to her account at the end of the month, providing "a nice 'cash-in-hand' perception for the customer," Beth Robertson of Javelin Strategy & Research wrote in a recent post. "The polar opposite of the experience consumers anticipated with the proposed monthly debit fee."
The new rewards program is currently being offered to BofA employees in select states who hold accounts with the company.
Following its disastrous announcement of plans to impose a $5 a month debit card fee, Bank of America suffered a 20-percent spike in account closings, BofA CEO Brian Moynihan admitted in an earnings conference call last week. The proposal was promptly reversed, but Bank of America's image—and other banks that announced similar plans—remains a bit tarnished.
The pilot program is geared toward retaining customers and attracting new ones, BofA spokeswoman Tara Burke says. "It helps deepen the relationship," she added. "It's about continuing to enhance their customer experience and to provide benefits to them"—the primary benefit being the convenience of not having to sign up for Email coupons or visit another website for deals, Burke says.
But can the near-complete reversal in policy help BofA win back the hearts and minds of consumers?
We won't know for awhile. For now, the service is only available to BofA employees in North Carolina, South Carolina, and Nevada, with plans to roll out the program to the rest of employees in February. Plans for the program to go live for regular customers are still up in the air, Burke says, as the company is being extra careful about researching and testing the service before releasing it to customers.
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Bank of America isn't the first company to pilot a rewards program like this, but they're certainly the biggest on the playing field, and more programs like it will probably start cropping up, says Dan O'Malley, founder and CEO of PerkStreet Financial.
"Big banks are raising fees across the board and as they're doing so they're trying to find additional ways to give value to their customers," he says. "They're trying to get people excited about how much they can earn from these programs and try to camouflage the amount that they're also raising in fees at the same time."
Still, O'Malley thinks the move is a good thing both for customers and banks. "This is an exciting opportunity," he says. "Banks sit on a tremendous amount of data that they can use to help their customers find ways to save and earn more. Banks are finally waking up to the power of that data to both help their customers and provide more profits for the bank."