The Financial
Advisor and Bloomberg
articles report on that “Bank Overdraft Fees Escape Tough Rules.” This follows also our blog post on our May 26th on CFPB rule making plans. But the
good news on likely little new rules is greatly mitigated by another fact: overdraft revenues are falling. Our clients show NSF/OD revenues are down over
last year, and independent analysts like Ken Usdin at Jefferies documents consumers have better options today for information and alternative
to overdrafts.
In fact, overall service charges for banks are falling in
total as shown by the chart below, the majority of which are overdraft fees, for community banks under $10 Billion,
despite efforts to re-price services.
Overdraft Fees In Millions Banks <$10 Billion
Source: FDIC
How can financial institutions see revenues grow in the new
environment? We have three proven steps:
1. Recognize
the key benefit of transaction accounts that generate revenues are liquidity
services. This is why overdraft fees
have historically been the largest part of Service Charge revenues.
Multiple Studies Show the Key Need of Transaction Services is Liquidity
2. Focus
on liquidity and small loan services for future revenues. Rather than trying to charge deposit fees,
look for revenues where the largest opportunity exists historically and in the
future. Banked consumers and small
businesses pay three times the revenues of overdraft fees ($77 Billion vs $31B for industry overdraft revenues) for liquidity and small loans that
banks currently forego.
3. Use
digital lending technology to deliver small loan and liquidity to consumer and
small business segments to profitably capture the revenues, without
cannibalizing any of your existing revenues. Technology platforms like PaySound for consumers and Cash Flow Checking for businesses drive profitable revenue growth without cannibalizing existing fees.
No comments:
Post a Comment