The news: Pressure from regulators and increased competition have pushed banks of all sizes to make drastic changes to their overdraft fees. But those cuts and reductions have impacted their balance sheets, especially for community and regional banks. Here’s how some banks are updating their overdraft policies to keep the revenue coming in, per The Financial Brand.
How we got here: The Consumer Financial Protection Bureau (CFPB) forced banks to reevaluate their overdraft fee policies last year when it said it would take a closer look at how banks are assessing the fees.
New overdraft policies: Though the changes affect all banks’ bottom lines, the fee reductions have hit smaller banks harder. But some banks have found creative ways to restructure their overdraft policies that don’t entirely eat away at profits.
The bottom line: Overdraft services are an important feature for many consumers—35% of Americans who’ve overdrafted their accounts more than 10 times said their most recent overdraft was intentional, according to the Financial Health Network.
The ability to overdraft keeps consumers in the banking system and prevents them from turning to expensive alternatives like payday loans. But consumers that use overdraft services at community banks will likely discover that these services are cheaper at larger banks or digital challengers. Small banks looking to retain their client base should consider trying out new overdraft policies to maintain—or perhaps even improve—customer satisfaction.
This article originally appeared in Insider Intelligence’s Banking Innovation Briefing—a daily recap of top stories reshaping the banking industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.
One Liberty Plaza9th FloorNew York, NY 100061-800-405-0844