Free Checking loses $186/account per year on average for the typical financial institution. With fee income declining and concerns that non-accruals and loan losses may be rising, many community financial institutions are taking a hard look at fee income opportunities. Strunk’s Value Checking program can help you significantly improve your bottom line and increase customer satisfaction. Let us show you how.
| Pro Forma | Free Checking | Value Checking |
|---|---|---|
| Median Average Balance | $2500 | $2500 |
| Interest Income | $29.00 | $29.00 |
| Fees | $105.85 | $167.25 |
| Total Revenue | $134.85 | $196.25 |
| Enhancement Cost | $21.00 | |
| Operating Expense | $321.81 | $321.81 |
| Pre-Tax Income/Account | ($186.96) | ($146.56) |
| 5-Year Impact/10,000 Accounts | $2.0 Million |
*Assumes 20% of Value Checking accounts fall back to Free Checking
1 Reverse Declining Checking Profitability:
Free checking accounts that were popular in the past have become very unprofitable for financial institutions. Two decades ago, all a consumer received with a free checking account was a debit card, statement, and access to their funds. Now, bill pay, online banking, mobile banking, and other costly services have been added to the typical account with no corresponding income to support it.
2 Offset Lower Overdraft Fee Income:
Fee income from overdrafts has dropped dramatically due to regulatory changes that all financial institutions must abide by. Changes to Regulation E in July, 2010 caused a drop in fee income of 20%- 30%.
3 Counter Shrinking Margins and Higher Capital Requirements:
Net interest margins have been narrow and are declining. Loan demand has also been soft. Increased capital requirements continue to phase in through 2019. As a result, fee income is even more critical. For commercial account analysis consumers the situation will worsen as interest rates rise.
4 Compensate For Declining Debit Interchange:
The Durbin Amendment to Dodd-Frank has curtailed debit card revenue and strategies to increase profitability by driving increased consumer debit usage have become less effective.
5 Protect Consumers From Credit Report Errors:
More than 40 million people in the U.S. have incorrect credit scores that negatively affect borrowing rates on mortgage loans, installment loans and credit cards.
6 Combat Identity Theft:
Javelin Research identifies identity theft as the fastest growing crime in the U.S. Recent studies show that consumers are willing to pay for identity theft alerts and credit score monitoring.
7 It’s A Product Consumers Want and Need:
Giving con- sumers something they want and need is key to maintaining and growing relationships. Your best relationships receive benefits for free. The bulk of accounts pay a fee for the service. Those who don’t want to pay a fee accept a lower cost account with few features.
8 Bolster Data Security:
As banking becomes more mobile the threat of identity theft increases. Likewise, as medical records become electronic with the advent of the Affordable Care Act, it is more likely someone will become a victim of med- ical fraud.
9 Differentiate Your Institution:
A recent Market Rates Insight study shows that community FIs have overlooked numerous high demand products that could help differentiate them from their competition and generate a lot of fee income.
10 Compensate For Increased Regulation:
More regula- tion equates to more expense for community financial institutions. Higher capital standards are around the corner. Tougher regulations on home lending and insurance products will make it more difficult to make loans and generate income.
Let Strunk help stop the free checking bleeding.
An independent certified public accountant has examined Strunk’s operations and found them to be in compliance with the AICPA’s Trust Service Principles. It was determined that Strunk meets the Security, Availability, Processing Integrity, Confidentiality, and Privacy criteria for SOC 2 established by the AICPA.
