CFPB Delays Overdraft Rules As FI Revenues Continue To Fall

Many bankers likely breathed a sigh of relief this week when the CFPB indicated it will delay proposing new rules for overdrafts until later in 2015, making implementation delayed to 2016.  The rules are likely to require analysis of a customer’s ability to repay before allowing an overdraft and allowing months to repay an overdraft rather than at the next deposit.

But FI executives are short-sighted if they think their service charge revenues are safe because of regulatory delays.  Revenues are continuing to fall as illustrated by the charge below for banks $10 Billion and under.  PayPal, which does nothing that does not settle to FI checking or credit card accounts, now does more revenue than the total service charges of all banks $10B and under.

The reason is not primarily regulatory pressure, but the growth of non-bank payments provider alternatives and the lack of effective response by FIs.  In the same week that the CFPB delayed overdraft rules, PapPal founders announced Affirm, another online alternative to overdrafts.

It is time now to serve your customers with new digital payments products to win back revenues, and plan for the eventual changes to overdrafts.  They are delayed but they are coming.  Smart FI executives are growing revenues with new payment and liquidity options like PaySound.^®