Emerging "No Overdraft Fee" Strategies at B of A and Key Bank

Bank of America has announced a debit-only account called the "Safe Account" with no overdraft fees ever.  Key Bank has also introduced a “Hassle Fee” debit-only account touting no overdraft fees ever.  Why?

Because research shows 70% of consumers are highly motivated by the positioning language of “no overdraft fees ever.”  Non-banks like Walmart’s Bluebird, American Express Serve, GreenDot’s GoBank and others are making hay by stealing transactions and revenues at the expense of bank checking accounts.

However, as shown in the American Banker, these “debit only” accounts are not profit winners for large banks. Our PaySound^® Checking Plan and Companion Card are highly profitable driving 30% growth in revenue at your bank because it is configured differently.  We allow “no overdraft fees” for even paper checks or ACH items for a larger monthly fee.  Our “debit only” Companion Card provides customer-controlled security in shopping with the card online or in-store.  We provide two account types to better segment consumer needs and find more than half of bank customers take both account types.  In addition to the monthly fees willingly paid by consumers, our banks are exempt from interchange caps,  driving significant new interchange per account.

Five years from now, “No Overdraft Fees Ever” will be a standard component of accounts at financial institutions.  Will your bank be a leader in winning new customers in the next two years, or a follower and seeing your customers transactions and revenues continue to migrate away?