AFP Survey Reflects High Sensitivity Among Retailers over Bank Fees

Nearly 90% of all bank fees merchants pay goes toward cash management and card processing, according to a report released on Tuesday by the Association for Financial Professionals, a trade group for corporate financial officers. Meanwhile, some 79% of retailers expect recent legislative changes, including the Durbin Amendment, not only to affect these costs but also to change or possibly change how they manage their relationships with their banks, according to the report.

The AFP report, based on a survey of its merchant members, underscores an attitude among retailers of price sensitivity and uncertainty about regulation (of the 79% who said regulation could change how they manage their banking relationships, only 2% said it would definitely make such a change). The Durbin Amendment, enacted last year as part of the Dodd-Frank Wall Street reform legislation, regulates the pricing and routing of debit card transactions.

The report also reflects widespread changes in how banks and merchant clients already manage their relationships, and a keen willingness among retailers not only to negotiate pricing but also to switch banks over pricing issues.

Relationships between banks and retailers have been in flux for months. Already, more than half of merchants (54%) say they have been pressured by their banks to at least think about buying services other than core retail services. “Over the past 12 months, retailers have seen relationships with their banking partners change significantly,” says the 11-page report. While 43% of retailers say their banks have added services aimed at merchant clients over that time, another 13% say banks have eliminated such services.

Also, retailers are apparently showing an eager willingness to contain banking costs through negotiations, with 76% reporting they are examining fees and asking their banks to negotiate. For those 80% of merchants that have left a bank over the past year and a half, service fees rank as the number-one reason, at 75%. This far outranks the second-highest reason, “consolidating bank relationships” owing to factors other than price, which came in at 50%. “Service-related issues,” at 45%, was a close number three.

Conversely, some 53% of retailers started a new banking relationship because the financial institution offered better pricing, according to the report. Twenty-nine percent said they added a new bank to spread risk among more institutions.

If pricing sensitivity is a reaction to short-term thinking at banks, retailers reinforced the view that such thinking is problematic for them. Some 37% ranked “developing strategic long-term relationships with less focus on the short-term needs from the bank” as their biggest challenge in managing bank relationships, number one by far.

The Bethesda, Md.-based AFP sent surveys in March to 1,500 members who worked for retailers, and received responses from 111, after allowing for invalid or blocked e-mail addresses. Fifth Third Bank underwrote the survey.