Automating Short-Term Thinking
by Samuel Greengard
Companies love to make customer fees and charges into key revenue streams. Airlines and banks have already mastered the fine art of extracting cash through an endless variety of fee-based practices.
Now, others are practically tripping over themselves looking for ways to amp up profits through fees.
Information technology makes this business strategy oh so easy. Computer systems identify and track discreet processes and transactions with aplomb. They automate the dirty deeds that humans would never want to tackle.
Can you imagine a banker saying to you: "Mr. Smith, you were short on funds in your checking account but you had lots of money in your savings account so our computer just transferred the money for you and, oh, by the way, we'll now charge you $25 for taking care of this automated transaction?
If I click a button on my computer or smartphone, it's free. If the bank's computer handles the same task I fork over a small fortune for what's labeled an overdraft.
Or what about the trend of merchants charging 50 cents to use a debit card instead of cash for a purchase? Yes, I know the bank charges merchants an interchange fee somewhere in the neighborhood of 1.3 percent. But that means that when I buy a $10 pizza they get charged about 13 cents. Talk about turning lemons into lemonade! The transaction becomes yet another profit center!
Worse, these punitive-based models treat everyone the same. So, if you're a A+ customer you get treated just like an F- customer. Just wondering: has anyone ever considered using BI and analytics to determine who should pay fees and penalties and who shouldn't pay them?
I know I'm not the only one who is sick of punitive business practices. The problem with this approach is that over the short-term it boosts profitability and allows business and IT leaders to think they're geniuses. Over the long-term, it produces a lot of pissed off customers that display zero loyalty to your products, services or brand. As soon as they find another company that offers lower fees they'll jump ship.
I don't expect the situation to improve anytime soon. American business has always excelled at taking a short-term view. Today's technology simply automates short-term thinking.