Collidge Bank and Trust Company

Topics: Economics, Bank, Transaction cost Pages: 1 (336 words) Published: December 1, 2011
The Coolidge Bank and Trust Company received its charter from the Commonwealth of Massachusetts in July 1960, was founded by a group of merchants and businessmen who were dissatisfied with the quality of service provided by the local bank in Watertown. The leader of the group, Mr. Milton Adess having no banking background focused on retail and introduced some new innovations as no-service-charge during 1964. They went ahead with dropping their $100 minimum balance requirement. It went ahead with other innovations as American Express Gold Card focused for M.B.A. students, Cool Cash concept, and an automated banking console. Now the problem which lies ahead of management is as follows: 1. With the introduction of NOW (Negotiable Order of Withdrawal) major chucks of customers are thinking to switch banks. 2. The people who are thinking to move are those customers who are having average monthly balance of $ 1000 3. There has been a significant growth in few months after its implementation. The management is facing the dilemma whether to introduce NOW or not. 4. If this Service is not introduced then there is a greater chance of losing value customers. Proposed Strategy

1. We propose to offer two ways of collection of charging Transaction cost. a) A fix transaction cost of $ 1.5 monthly
b) A transaction cost of $.12 per transaction
2. No minimum balance is required in this account.
3. Interest to be paid is on Average daily balance. The proposed rate of interest is @ 5% The market is being competitive market as lots of players are already offering this service. It is assumed that the company on an average is earning return on its lending @ 9.5%. We can woo customers because we are offering transaction cost @.12 which is lower than the current market. No minimum balance is a bonus for customers as there is no obligation on their behalf to maintain it. This is done so that we can retain our current...
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