When it comes to maintaining financial stability these days, a great deal of uncertainty comes into play. For financial institutions, on-going regulation on existing non-interest income sources, a lack of new revenue stream opportunities, as well as increased competition from non-traditional financial service providers can paralyze a bank’s performance if steps aren’t taken to find reliable earnings solutions.
For your customers, any number of unexpected situations can create a ripple effect that puts a heavy burden on a tight budget for extended periods of time—like forgetting to record the amount of an unusual purchase. Or, a health crisis or fender bender that results in medical bills, costly auto repairs and potential increased insurance premiums that can be difficult to afford when there is no emergency fund. According to a Bankrate survey, just four out of 10 Americans have savings they could rely on to cover an emergency expense—while three out of five had experienced a major unexpected expense last year.
In both situations, relying on the status quo to ride out uncertain times typically leads to unfavorable results—continued low performance for your bank, and your customers dealing with unexpected situations and financial obligations.
Compliant overdraft solution adds certainty across the board
One proven strategy that addresses the financial uncertainty for both banks and their account holders is a fully disclosed overdraft program. Implementing a program for the first time—or updating an existing one that has become stagnant—provides a reliable source of non-interest income to help achieve performance goals and more. At the same time, a discretionary overdraft program extends a safety net to help account holders address temporary financial shortfalls and can help them avoid additional fees when used correctly.
And when administered by the following guidelines, banks can rest assured that their program meets all regulatory expectations and best practices:
Address the unknown with certainty
As financial institutions remain on the lookout for potential revenue sources, regulators have continued to state that “there are currently no new regulatory amendments or specific timing for when a rule may be proposed on overdraft programs.” But it is important not to take a “wait and see” attitude while your customers continue to face economic challenges of their own.
A fully disclosed overdraft program—one that is based on the latest regulatory guidelines and best practices—can help to protect your revenue and erase your regulatory uncertainty. At the same time, it can put your account holders’ minds at ease when it comes to protecting themselves against unexpected expenses and multiple fees when they make an error on their account. From a service standpoint, that kind of certainty creates a positive consumer experience that leads to loyal, long-time customer relationships.