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Does Your Overdraft Program Treat Account Holders Like People … or Data Points?



Imagine you drive 15 miles to work every morning, to a job that demands you be on time, every time. You have two freeway options: one with a speed limit that remains constant at 65 mph, or another with a varying speed limit that can be 25 mph one day, 80 mph the next, or anywhere in between. Which road is more dependable? Which road would you choose to take?

That’s how I describe the difference between a fully disclosed, transparent overdraft program with fixed limits, versus an overdraft program with variable limits, set for each account holder by a matrix of data. The former, a steady and reliable option that gets you where you need to be; and the latter, an unpredictable route that can end up leaving you frustrated and in a lurch.

There’s a lot of spin surrounding matrix-based overdraft programs, and it seems pretty convincing on the surface. But what’s hiding behind these “services,” and do these models actually provide a disservice?

What is your definition of a “managed” overdraft program?

I’ve heard both matrix-based and fully disclosed overdraft programs described as “managed.” Which defines that term better?

If you consider a “managed” overdraft program to be one that relies on myriad data points to produce individual overdraft limits—which change daily—perhaps a matrix-based program fits that definition.

But if you look at a fully disclosed overdraft model, you’ll see a lot more “management” going on, in the form of:

  • Account holders education and communication of program details upfront
  • Comprehensive and continuous training for all staff, to communicate consistently about the program
  • Ongoing reviews of communication compliance and limits

Don’t get me wrong, this type of program utilizes data—to monitor usage, identify trends and responsibly generate non-interest income—but not to reduce your account holders to faceless data sets.

Which overdraft model provides a higher level of service?

The fallacy of a matrix-based overdraft program is that its top focus is the perceived management of risk. That’s what the software is working so hard to do behind the scenes as it sets limits based on the account holder’s ability to repay—minimize risk. When you have dynamic or variable limits, it clearly puts the bottom line ahead of the customer’s experience.

That’s providing a disservice.

With a fixed-limit, fully disclosed overdraft program while employing best practices, you offer a reliable safety net for financial emergencies. That’s providing a service and added value. They’re free to use the service responsibly, as outlined in the terms that they accept before using it while minimizing risk. It’s a win-win for your account holders and your bank or credit union.

Which model better meets compliance demands?

The data behind matrix-based overdraft programs seems to mesmerize and dazzle. But does sophisticated data translate into better adherence to regulatory expectations?

Well, how does one “opt-in” to a program that uses an algorithm? How do you agree to limits when they’re always changing? That’s a huge compliance risk right there. These programs can’t disclose that which they can’t explain.

A better option would be to disclose all fees, limits and exactly how the program works upfront. On top of that, it’s in your best interest to choose an overdraft solution that offers 100% written compliance guarantee, along with support from experts with a history of best practices.

Which model offers more sustainable revenue?

If you start with no overdraft program at all and then implement a matrix-based program, it’s true that you’ll probably earn more revenue—at least in the beginning. But once your account holders start trying to use it and see that they can’t count on a reliable limit, usage starts to dwindle. Congratulations—you’ve at least mitigated risk!

A fixed-limit overdraft program, when run correctly, mitigates risk and outperforms matrix-based programs. You’re offering a consistent limit to everyone, a service they know they can use if they need to.

So, my question is, why settle for a little additional revenue with a questionably compliant matrix-based program when you can develop sustainable revenue source by providing a reliable service, all while remaining totally compliant?

Treat your account holders like real people and not data points with a fully disclosed overdraft solution.


Mark Roe has more than 34 years of experience in the banking and financial industry. He joined JMFA as a consultant in 1996 before moving into regional sales with the company. Mark currently leads sales efforts and training initiatives for JMFA’s fully disclosed, fixed-limit overdraft consulting service, JMFA NEXT GENERATION OVERDRAFT PRIVILEGE®.


JMFA is one of the most trusted names in the industry. Whether it’s recovering lost revenue, uncovering new savings with vendor contract negotiations, creating more value, serving your account holders better or delivering a 100% compliant overdraft service—JMFA can help you deliver measurable results with proven solutions. To learn more, please contact your local representative or call us at (800) 809-2307.


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