Fiserv Inc. unveiled a Revenue Expansion program, a solutions roadmap designed specifically to help credit unions affected by Regulation E.
On Nov. 12, 2009, the Federal Reserve Board published a final rule under Reg E that prohibits financial institutions from charging overdraft fees for ATM or one-time debit card transactions unless a consumer opts-in to the overdraft service.
The Overdraft Protection Rule, which took effect July 1, 2010, stands to impact the profitability of many depository institutions. According to Patricia Hewitt, director of debit advisory services for Mercator Advisory Group, U.S. overdraft fees generate an estimated $30 billion annually.
Fiserv models project that 20% to 50% of overdraft fee income associated with electronic transactions is at risk.
In this new regulatory environment, financial institutions need to create a strategy to comply, and use it as an opportunity to deepen their consumer relationships, develop innovative product offerings, and create a competitive advantage.
To achieve these goals, Fiserv created Revenue Expansion as a highly differentiated program with new products, services and support to meet consumer needs while addressing the impact of regulatory and economic changes.
“Financial institutions must act to address the new realities of deposit economics and find sustainable revenue sources that will replace lost fee income,” says Hewitt. “Many financial institutions that don't have the resources to create and implement an overall strategy to address the new regulatory environment, will find a program such as the one Fiserv has created very valuable.”
Fiserv has identified three areas of focus for revenue expansion:
* New deposit products allow financial institutions to present creative new offerings to consumers. These products include alternatives to free checking such as incentive or rewards-based checking: relationship or activity-based pricing; card-based initiatives such as consolidating PIN networks; increasing debit card penetration, activation and use; and new consumer payments alternatives such as expedited electronic bill payment and person-to-person payments.
* Short-term consumer liquidity solutions address the potential impact from Reg E. For consumers who “opt in,” financial institutions can implement dynamic overdraft threshold strategies on an account-by-account basis that provide consumers with overdraft limits that match their capability to repay.
For consumers who “opt out,” financial institutions may offer a small dollar, short-term loan for which qualification is based on deposit history rather than credit score.
* Cross-sell, loyalty and retention products, including card rewards, relationship rewards, incentive-checking products, and relationship pricing, can drive consumer behavior and encourage long-term retention and greater product usage.
Implementing predictive analytical technologies can help financial institutions predict what product or service a consumer will want next, which can increase revenues and consumer loyalty, and reduce attrition.