Overdraft fees

Rethinking Overdraft and NSF Fees? Your Bank or Credit Union May Already Have the Tools to Help Account Holders Avoid These Fees and Reduce Friction

Fees from overdrafts and non-sufficient funds (NSF) have recently attracted a lot of attention, with some banks and credit unions announcing drastic reductions and even elimination of fees altogether. Each financial institution is different, and the cost-benefit will vary, but overall, the industry could collectively be leaving billions of dollars on the table, according to research from the Consumer Financial Protection Bureau. 

With the potential for lost revenue, you may ask why a bank or credit union would consider eliminating fees. Reducing friction and retaining existing customers and members, as well as attracting new account holders, is a significant consideration – especially in today’s competitive market. Many digital-only institutions have removed these unpopular fees and made it easier to access banking services, even offering services or sign-on funds and incentives to appear more attractive to new consumers.  

As traditional banks and credit unions consider these strategies, there are best practices that can be implemented today to remain competitive and to help customers and members avoid over drafting their accounts, in the first place.  

Keep Account Holders Up-to-Date on your Offerings (and Lack of Fees!)

Many community institutions and credit unions don’t have fees today simply based on their structure and setup. If your institution falls under this category, it may sound obvious but it’s important to ensure your customers and members know about this offering! Your differentiated services and offerings will keep you competitive and it’s important to share or promote them through targeted advertising and campaigns both in the branch and through digital channels. 
  
Leverage Automatic Alerts and Notifications 

Overdraft and NSF fees are often frustrating for customers and members, so banks and credit unions must consistently communicate account balances through real-time alerts and notifications. Integrated seamlessly into digital banking platforms, financial institutions can automatically push messages to account holders in real-time, as well as alert them when low balance thresholds are reached. 

Promote Anytime Access to View Balances and Transactions

Digital banking platforms enable anytime, anywhere access to view balances and transactions, and some best-of-breed capabilities even enable users to view NSF transactions within their account – often allowing them to fund the transactions using alternatives such as credit cards. With 24x7 access across all channels, customer and members remain in better control and positioned better to avoid overdraft or NSF fees. 

Provide Education to Build Trust and Establish Healthy Financial Habits
  
It’s crucial to provide financial education that builds long-term relationships and establishes your institution as a reliable source of wellness advice. Promoting savings habits through personal financial management (PFM) tools like goal setting and budgeting, as well as education around saving, investing, and other financial education, promotes positive money management. In addition to building trust with account holders, you’ll attract new customers and members through user-focused solutions and programs. 

Utilize Data Analytics to Stay Ahead and Eliminate the Risk of Overdraft Fees or NSF Situations

Data analytics solutions are powerful for banks and credit unions to help identify which customers or members are at risk of overdraft fees or making NSF transactions. By leveraging AI and predictive analytics, institutions supplement their transaction information with consumer behavior data and individuals’ financial profiles, enabling better intelligence overall that can be applied to real-time alerts or messaging across various channels like email, phone, in-solution messaging, chatbots, and branch visits. In addition, data analytics solutions can benefit customers and members by helping to forecast account income and payments, allowing users to better manage their funds and plan for the future.

The decision to eliminate overdraft and NSF fees is unique for each institution, linked to long-term goals and strategic initiatives. With a competitive market landscape, removing friction remains in the spotlight and highlights the importance of enhancing customer and member-facing solutions that promote loyalty and retention. 

Contact Team Alogent today to learn more about implementing these best practices across your digital banking channels with NXT, our unified online, mobile, and digital banking platform. With built-in, data-backed capabilities like personalized messaging, automated alerts, and financial wellness tools, account holders remain in complete control of their financial stories. When paired with AWARE’s data analytics and visualization solution, institutions gain powerful insights that keep their banks and credit unions competitive and top-of-mind with account holders.  

eBook: Tips and tools to increase engagement and reduce friction

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