Banks across the country saw a steep decline in fee income derived from overdrafts in 2020 likely due to pandemic related stimulus checks that pushed up consumer’s checking account balances. It bounced back somewhat in 2021 but there was another sharp decline in 2022.
Service charges that banks derive from overdrafts hit an all time high in the late 2000’s when the industry collected over $30B annually. In 2022 that number is less than $8B according to a recent report from the Consumer Financial Protection Bureau, a 75% drop in fee income. What happened and what can our industry do?
Consumer spending habits have changed and they are less likely to overdraw their account. Also, debit card regulations changed in 2010 which made banks get confirmation that a consumer wants their debit card paid at point of sale, even though they may not have enough money in their account. This was a great regulation and it gives the consumer a choice on how they want their account handled in the case of an overdraft. It also alleviated the problem for banks when they have to decide what to do in that situation. A win-win situation for consumers and banks.
Bankers for decades have been afraid to charge fees for services received by their customers. An example would be charging a fee for a checking account. Strunk’s Value Checking program has been around since 2011 and over 1,300 financial institutions have implemented it. Very simply, add benefits to all checking accounts and charge a small monthly fee on the account. ID theft protection, roadside assistance, and cell phone coverage are some examples of valuable benefits consumers are paying for elsewhere.
Contact Strunk at email@example.com to learn more about Strunk’s Value Checking strategy. It is very simple to implement and consumers will like the service.