Momentum is growing for banks and credit unions to eliminate or significantly reduce overdraft fees, and many institutions are hard at work planning how to navigate this revenue transition.
What started with Ally and Capital One now includes everyone from Fifth Third to $3.9 billion Jovia Financial Credit Union. In addition to the Consumer Financial Protection Bureau, attorneys general in several states are beginning to look at these fees from a consumer protection and regulatory perspective. It seems inevitable that overdraft fees will cease to provide a substantial revenue stream for banks and credit unions.
What is a financial institution to do to offset this loss in non-interest income? Consumers should remember that this revenue helps pay for free branches, digital banking, P2P payments, contact centers and debit cards with $50 fraud loss limits.
While making up all the decreased revenue from overdraft may seem like a pipe dream, financial institutions should be building intentional offset strategies to cushion the blow. Here are some ideas:
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