The following is an excerpt from today’s Global Newsletter.
It’s no secret that many traditional banks have relied on credit card late fees to bolster their bottom lines. It’s easy cash for them, but it’s an intensely punitive practice that can pressure consumers with crippling compounding debt.
After the CFPB proposed slashing credit card late fees to just $8 a month in February, the reaction has been swift and predictable — banks raged.
It’s time for them to rip off the late-fee Band-Aid and find new income streams. This would be an opportunity to adjust business models and determine how to drive value beyond late fees. Those banks that figure it out will be lightyears ahead.
A simple shift to subscriptions would replace the revenue and be much more palatable for consumers if they knew late fees were dusted in exchange for a modest monthly cost.
Banks also have to know there are many in Congress coming after these fees.
Fintechs have built their businesses on a no-fee subscription model for years, and if banks get…