American Banker Article on PaySound Drives Lots of Interest and a Key Question

On July 7^th Mary Wisniewski in the American Banker profiled our PaySound^® checking strategy centered on providing “no overdraft fees ever.”  We have had a tremendous response and interest as a result of the article!

The most frequently asked question we get is how the business model works.  Some say they are worried consumers will switch away for their existing overdraft services, reducing revenue.  Others argue that the value of the account to avoid overdraft fees is not worth the money, particularly since consumers may have to pay merchants return check charges.  In fact, PaySound^® cannibalizes no existing revenue and drives incremental revenue consumers willingly pay.

The key point about the success of PaySound^® is that it adds incremental revenue from segments community and regional financial institutions are not serving well now.  Heavy overdraft users will not switch to a PaySound^® account because they want items paid, and PaySound^® is a return-all account.  Occasional over drafters will not see the value in the account because they do not expect to pay overdraft fees.

But market segments where financial institutions are losing transaction revenue today to non-banks will be thrilled to bring revenues to those offering PaySound^®:

Under Age 35 Millennials:    This segment does not relate to banker promises that paying an NSF item will save them a merchant return check fee.  They state they have never paid a merchant with a check in their life, and use the debit card heavily.  Their need is to be declined when their account has insufficient funds because that is how they manage their account.  They are paying others such as prepaid cards, merchant cards and new neo-bank accounts like Simple and GoBank for services.  They would love to have their bank offer them a service with “no overdraft fees ever.”

Single Mothers:  Single mothers live a tight budget and manage that budget well.  What they cannot have are surprises.  An unexpected fee, even when an items is paid, can mean they do not have month that day for diapers or formula.  They ask banks and credit unions for an account where they can budget a monthly fee but be assure of no surprise fees like overdrafts.  Unfortunately, banks and credit unions do not offer such an account, so they turn to Walmart’s BlueBird, GoBank, prepaid cards and others where they can write checks but have no overdraft fees ever.

Smart Liquidity Managers: Overdrafts are expensive.  In fact, overdrafts for many consumers are more expensive that payday loans, since getting cash in hand can pay several bills but an overdraft fee is charged for each payment.  Savvy consumers have learned that much better options are BillMeLater, FloatMoney, BetterFinance, Lending Club and others are offering quick online fair credit.  PaySound offers the option of automated set up of a bank line of credit to link to the package account which is highly attractive to some.

Budget Planners: While current overdraft users will not switch to PaySound^®, research shows that nearly 7 out of 10 consumers are “very concerned” about overdraft fees.  As they develop budgets and plans, they like knowing clearly and simply what fees they will pay for a package of services and an account that pays interest.  PaySound^® is essentially the same cost as an interest bearing checking account but with more benefits.

PaySound^® drives new revenues, transactions and new accounts from segments community and regional financial institutions are under serving today.