I don’t know that there’s a single answer, but the replies here are in the neighborhood. Fees of some kind are the only revenue model, so you pick the ones that work for your use case.
Two other thoughts, one speculative/general and one where I know of what I speak:
If you make most of your income off a small group of your customers, then it’s wise the charge some nominal fee on the other customers to get them to breakeven unit economics. (That holds in most any industry, not just finance. Consider the endless think pieces on the problems caused by a high proportion of free users at zoom and Dropbox.) No, you’re not “making big profits” from them, but the point is to make sure your customers aren’t adversely selected. That can mean, “let’s still make something off the people who pay their credit card bill every month.” It can also mean, “overdrafts create manual work in our back office; let’s make sure they pay for themselves and aren’t correlated to our profit margin on the real business, which is lending.”
Area I know more about: for credit cards in particular, don’t underestimate what the annual fee does for the issuer. The psychology of it for the consumer is huge. People will cancel accounts they’re not using, sure. That helps, because forcing unused accounts closed can draw regulatory headaches. But consumers also consider the card more valuable and may be more loyal to it if it costs as much as their Netflix subscription each year. The issuer is making money on other sources—interest, interchange, travel portals, etc. The fee is, for the right type of customer, a kind of marketing device.
If you know what you are doing, the credits that you get for doing things you already do should offset the annual fee even if you don’t use the card. Wander over to r/creditcards.
We have five Delta cards between my wife and myself that we only make one charge a year on for the hotel credits. Just by having the card, we get a buy one get one free plane ticket good for anywhere in the US, Mexico, Central America or the Caribbean. That more than pays the annual fee.
We have over a dozen trips planned this year and we took over a dozen each year since mid 2021. It’s a hint of ours.
Two other thoughts, one speculative/general and one where I know of what I speak:
If you make most of your income off a small group of your customers, then it’s wise the charge some nominal fee on the other customers to get them to breakeven unit economics. (That holds in most any industry, not just finance. Consider the endless think pieces on the problems caused by a high proportion of free users at zoom and Dropbox.) No, you’re not “making big profits” from them, but the point is to make sure your customers aren’t adversely selected. That can mean, “let’s still make something off the people who pay their credit card bill every month.” It can also mean, “overdrafts create manual work in our back office; let’s make sure they pay for themselves and aren’t correlated to our profit margin on the real business, which is lending.”
Area I know more about: for credit cards in particular, don’t underestimate what the annual fee does for the issuer. The psychology of it for the consumer is huge. People will cancel accounts they’re not using, sure. That helps, because forcing unused accounts closed can draw regulatory headaches. But consumers also consider the card more valuable and may be more loyal to it if it costs as much as their Netflix subscription each year. The issuer is making money on other sources—interest, interchange, travel portals, etc. The fee is, for the right type of customer, a kind of marketing device.