This is a member post written by Darwin, the author of the blog Darwin’s Money. Darwin is a numbers guy with an MBA constantly evolving to today’s financial innovations and opportunities. If you like this article, subscribe to the Darwin’s Money RSS feed for more.
I was TDBank this past weekend setting up a new business account for my latest small biz venture with an old college buddy (CAD Drafting Outsourcing). Anyway, while I was talking to the bank manager, there was a period of like 10 minutes where the change machine was going nuts behind me counting change. It was pretty annoying because it seemed like it was never going to end and it was quite loud. After it finally stopped, there was a commotion. I heard a lot of yelling and some guy started dropping the F-Bomb repeatedly.
We’re All About to Be Killed – WTF?
I turned around to see what was going on and there was a thug standing there covered in tattoos going crazy on the bank teller. He said he’s had it, he’s not taking their BS and he left the store. I heard one of the other managers yell, “Just call the cops”. The, “He’s going out to his car, call the police”…”Too late, he’s coming back”…“Does he have a gun?“. We all thought we were going to be shot. This guy was screaming at the top of his lungs, left the bank and returned from his car after retrieving something. He was clearly disturbed, prone to violence and quite perturbed.
Upon re-entering, the conversation strangely turned to, “What do I have to do to set up this stupid account? I’ve been coming here for years and this change-counting thing was always free“. And I never figured out what he went to his car for, but evidently, it wasn’t a gun.
Brilliant, Just Brilliant Business Idea
Evidently, TDBank used to allow just anyone to walk in the store, have the change counter take their change and then give them the cash at the counter. More recently, they enacted some sort of fee (perhaps 6%?) for non-customers. So, this guy was unaware of this new requirement and was very upset when he realized he couldn’t just “get his”.
Part of the conversation included him saying, “This really pisses me off. This was always one of the perks of having a TDBank/Commerce whatever around here.“. I have to hand it to the bank employee, as he was pretty cool about the whole situation, and he replied, “Yes, sir; that is a perk for customers and you’re not a customer at this time.” Finally, the guy “got it“, that the bank expects you to be a customer and they didn’t want random people just “using” them anymore.
The brilliant part is, I wonder if this was TDBank’s plan all along (previously Commerce). For years, perhaps over a decade, allow everyone and their grandmother to come into any branch for free change-counting. Occasionally, some small sub-set of people would like the bank enough or find it convenient to just set up an account anyway. Others would just associate the bank with that place to get the change converted and go their for years.
Well, one day, TD flips the switch. Without publicizing it very well, enact this new policy that requires people to sign up for an account in order to retrieve their change – or be subject to a charge. Overnight, TDBank sees one of two things happen: 1) Either their fees spike and previously unplanned free cash flow comes pouring in [after all, the change machines were already in place, so this is just excess profits], or 2) a mass influx of new accounts are opened. With acquisition costs being what they are in the banking industry, this is a goldmine.
And in order to open an account, there’s an initial deposit required and then a minimum account balance requirement. Either one of these scenarios (and either a or b is playing out thousands of times per week across North America) are an immediate boost to their bottom line and long-term cash flow.
It’s genius. I just wonder if they planned it this way from the start or they started to feel like they were being taken advantage of.
This is a prime example of the “Free to Fee” initiative that some companies can pull off while others fail.
Do You Have Examples of Free to Fee Working or Failing in Various Businesses?
Pure Genius or Dumb Luck?
Great points. I doubt it was a brilliant strategy considering the machine was in there for so long being used for no charge by anyone.
It does seem like a good idea, unless someone does come back in with a gun!
I agree with Dr. Dean on this one. Since the machine has been free for so long, I doubt it was a long-term strategy. But, it was most definitely a great implementation for their profits. I can’t think of any other business that would be able to do something like this to attain new customers though.
Bait and switch? Not against charging for a service, but don’t do it in a sneaky way. Will leave a bad taste.
Maybe I’m giving them too much credit LOL! But it’s a lesson to future entrepreneurs. Free to Fee can pay off big years down the road…
I’m pretty sure that because of regulations, they have to disclose the fee in some way that is fairly obvious. Like a sign on or near the machine. They guy was probably just assuming and didn’t pay any attention. I think most people would be surprised at the amount of traffic that a machine like that, with no fees, can get from non-customers. It still probably gets a fair amount of traffic from non-customers who are willing to pay the fee too.
I like Coinstar’s model as well which is similar to what you described……They start with a fee, but waive it if you put the money onto a gift card. Overall their business is horrible for the consumer (aside from convenience), but such a great idea. Taking 6-10% of your money in exchange for you giving you back your money!
I agree; the 6% is absurd. I would sooner just wrap the coins myself or sign up for an account. People pay ridiculous amounts of money for convenience though (laziness).
It cost money to service those machines. I see an example of this with the aluminum can recycling machines at our super market. The super market only take the cans for the product they sold. The machine has a bar code reader built in. Sure Budweiser can be recycled at any market, but I have to go to a specific store to recycle Bridgeport IPA or Big Sky IPA.
If this was a strategy, it is a bad one. Yes, many of the people who use the service will convert to become a customer, however many of them will be angry too. Angry people will tell their friends and spread a lot of ill will. In this age of social networks, it can have some impact on the business.
You would have thought they would have warned the guy before dumping all of his coins into the counting machine. I would be mad too if I had waiting 10 minutes for my coins to be counted, just to find out there was a fee.
I’m not sure what kind of notification they have there. Judging by the guy’s intellect, it may have been displayed openly.
My credit union just started to charge for this service, and they will no longer accept rolled coins for deposit without a charge. I’m a member and they still charge the fee. Very annoying!
Yeah, that sounds lame as a member. But then again, often times credit unions are a better gig than commercial banks.
My local bike store has a business model somewhat like this. They provide store rides of 20 miles, every day of the year. They’re free. However, if you don’t purchase at least some of your cycling gear there, you will quickly be ostracized. It is a very effective system.
Not sure if the business strategy was to lure customers via the free to fee approach. Maybe they’re just looking to improve topline revenue and see this as a small but easy way to do so? Who knows. Either way, the customer sounds like he was a lunatic. Kudos to the bank employees for apparently handling the situation well.
Yes, they handled it well; nobody freaked out and they didn’t kiss his butt. They politely pointed out what a schmuck he was acting like.
I am sure that you are giving them too much credit to have thought of this as a long-term strategy. The more likely scenario is that someone wanted to look for ways to increase profits and decided charging a fee for non-customers could bring in more revenue. I save my coins and roll myself but have a huge jar of pennies that would take hours to count and roll. I am thinking that the local CoinStar machine might actually be worth it to save me that kind of time.
This is exactly what is happening with Chase. They used to offer free accounts that suddenly switched to fee accounts if you didn’t meet some of their hurdles. Another reason I really dislike greedy banks, grrr.
I vote “they started to feel like they were being taken advantage of”. After all they are a business and they exist to make money.
I think someone wised up at the bank and said “I have a lightbulb!!!” and spilled out the idea you identified above. It’s a win-win for them…
This is going to date me, but Netzero had free dial-up access with the only catch being that you had to see an add at the top of your browser window. Some guys (as I whistling) figured out way to bypass the ad, so they started charging a small fee instead. This snippet of a story doesn’t have the same punch as your does :)
So glad it wasn’t a gun! That is really interesting strategy.
I was just thinking that about Siriux XM radio…give it free in new cars for 3 months, then charge a fee..per car…for radio programming. Who would’ve thought their business model would’ve worked before they had the car idea.
Wow that must have been scary. I myself stop using coin counting machines at the grocery store b/c it really annoyed me that they took a fee so I roll my own coins now and exchange them at my bank for free. That is pretty genius of the bank to charge the fee to non customers but I bet they never anticipated someone freaking out like that guy!
Tense story. Glad it was just some maniac getting upset over fees. Bait and switch. Free to fee. Maybe one day when we’re all successful bloggers, we can charge for our super premium content. Just hope no one whips out a gun!