Engagement Brief: Fee-Savings Opportunity in SMB Banking
You are interviewing for a Strategy & Analytics role at HarborBank, a US-based regional bank with a strong footprint in the Southeast and Midwest. HarborBank has historically competed on relationship banking for small and mid-sized businesses (SMBs), and it has invested heavily in digital channels over the last three years.
Company context
HarborBank serves ~420,000 SMB customers (defined as businesses with <$20M annual revenue). The bank offers business checking, debit cards, ACH/wires, merchant services (through a partner), and a small-business credit card. HarborBank’s SMB segment generates $1.1B annual revenue across net interest income, interchange, and fee income. However, growth has slowed: SMB net new accounts are up only 2% YoY, and digital-first competitors are increasingly winning new formations.
HarborBank’s leadership team is concerned about “fee leakage” and “fee frustration”—SMBs paying avoidable fees (e.g., wire fees, out-of-network ATM fees, monthly maintenance fees, overdraft/NSF, paper statement fees) because they are on the wrong plan, using the wrong payment rails, or lack visibility into cheaper alternatives. The bank believes these fees are driving dissatisfaction, churn, and negative word-of-mouth—especially among digitally savvy micro-SMBs.
Trigger event (why now)
Two things happened in the last quarter:
- A fast-growing fintech neobank, Pine, launched a campaign targeting HarborBank’s markets with a simple message: “Stop paying bank fees—switch in 10 minutes.” Pine offers free business checking, discounted wires, and automated alerts that recommend cheaper transaction methods.
- HarborBank’s quarterly NPS survey showed SMB NPS dropped from +34 to +22. The biggest decline came from customers with <$250K average balance and high transaction volume.
The CEO has asked your team to propose a strategy to identify opportunities to save SMB customers money on bank fees (without violating regulations or creating unfair/opaque pricing) and to execute that strategy in a way that improves retention and growth. The CFO is supportive but cautious: fee income is material, and any reduction must be offset by higher balances, higher interchange, or reduced churn.
Product and economics snapshot
HarborBank’s SMB checking has three main plans:
- Basic Business Checking: $15/month maintenance fee waived if average daily balance (ADB) ≥ $10,000. Includes 100 free transactions/month; then $0.40 per transaction.
- Plus Business Checking: $35/month waived if ADB ≥ $25,000. Includes 500 free transactions/month; then $0.25 per transaction.
- Analyzed Business Checking (for larger SMBs): earnings credit offsets fees; requires treasury onboarding.
Other common fees:
- Domestic wire: $25 outgoing, $15 incoming
- ACH: $0.50 per item (free on Plus up to 200 items)
- Out-of-network ATM: $3.00 (plus operator fees)
- Overdraft/NSF: $35 per item (cap: 3/day)
- Paper statements: $5/month
HarborBank earns interchange on debit card spend and a portion of merchant services revenue (rev-share). The bank also values deposits: average SMB deposit spread contribution is estimated at 2.2% annually on balances (after funding costs).
Data provided (last 12 months)
Below is a simplified view of fee incidence and customer segments.
| Segment | Share of SMB customers | Avg ADB | Avg monthly debit spend | % paying any fees monthly | Avg monthly fees (among fee-payers) | Annual churn |
|---|
| Micro (0–5 employees) | 55% | $8,000 | $6,500 | 48% | $28 | 14% |
| Small (6–25 employees) | 30% | $22,000 | $18,000 | 39% | $41 | 9% |
| Mid (26–100 employees) | 12% | $75,000 | $55,000 | 22% | $63 | 5% |
| Larger SMB (101–250 employees) | 3% | $210,000 | $120,000 | 15% | $88 | 3% |
Fee mix among fee-payers (share of total fee dollars):
- Monthly maintenance: 22%
- Excess transactions: 18%
- Wires: 16%
- Overdraft/NSF: 15%
- Paper statements: 9%
- Out-of-network ATM: 6%
- Other: 14%
Competitive landscape (qualitative):
- Pine (fintech): free checking, low wire fees, strong UX, limited cash deposit support, no branches.
- MegaBank (national): broad product suite, aggressive bundling (waive fees with payroll/merchant services), strong treasury.
- Community banks: relationship-driven, less digital sophistication.
Your task
As the candidate, you are the Strategy lead asked to propose a plan. In the interview, you should:
- Size the opportunity: Estimate how much annual fee burden is potentially “avoidable” for SMBs and what portion HarborBank could realistically reduce over 12 months.
- Diagnose root causes: Identify the main drivers of avoidable fees (plan mismatch, behavior, product gaps, education, pricing complexity).
- Assess competitive dynamics: Use a structured lens (e.g., Porter's Five Forces and/or SWOT) to explain why fee-savings is becoming a battleground and how competitors might respond.
- Recommend a strategy: Propose a fee-savings program (product changes + analytics + go-to-market) that improves retention and growth while managing P&L impact.
- Define execution: Outline a phased implementation plan, key metrics, and how you would test/iterate.
Constraints
- Timeline: 12 weeks to launch an MVP; 12 months to show measurable retention impact.
- Budget: $4M incremental budget for the first year (technology + marketing + ops).
- Regulatory/compliance: Must meet UDAAP expectations (no deceptive practices), fair lending considerations if any credit-related changes, and clear disclosures.
- Tech/Org: Core banking changes are slow (6–9 months). However, HarborBank can ship changes in the mobile app and digital servicing layer within 8–12 weeks.
- CFO guardrails: Net fee income decline should be ≤ $25M in year 1 unless offset by measurable improvements in retention, balances, or interchange.
What a strong answer looks like
A strong answer will quantify the opportunity, propose a segmented strategy (not one-size-fits-all), anticipate competitive and financial trade-offs, and show how you would execute and measure impact.
