A new Javelin Strategy & Research report issued â âReg E and Overdrafts: How Financial Institutions Can Use Mobile to Increase Profits Post Reg Eâ â finds that with the advent of Regulation E and facing the loss of significant revenue in overdraft fees, financial institutions are responding in two basic ways. One tactic is to try and preserve those fees â fees consumers consider âgotchaâ fees due to their getting no warning and having no way to respond. The better strategy is to adapt to the new regulations with the aim of becoming their customersâ financial ally and a âgot your backâ bank. One way FIs can do this is by offering customers timely, actionable and relevant mobile alerts.
Almost twice as many overdraft violators â consumers who have paid at least one overdraft charge in the past year â use mobile banking as do consumers overall and they want to be alerted before an overdraft occurs. âMany consumers see financial regulations as a victory and feel they now have greater say over what fees to pay,â said Mary Monahan, Research Director. âFIs can transform their image from adversary to partner by being more transparent about the fees they charge and by giving their customers the control they want â such as being able to respond to a mobile alert before incurring an overdraft fee.â
The Reg E and Overdrafts report gives an overview of Reg E and its existing fee structure and covers how banks and credit unions can reposition themselves and revamp their business models to recoup lost fees due to Reg E â and what certain FIs are doing already. It also discusses who overdraft violators are, the behavior of overdraft violators and how they should be targeted, how consumers are impacted and their options post Reg E and how mobile can be used as a solution for both banks and customers.
Selected Key Report Findings â Reg E and Overdrafts
-Mobile banking can play a key role in enabling financial institutions to communicate more effectively
with their customers by delivering relevant information and notifications in real time whenever customers
want it, wherever they are located and through a lower cost channel.
-The mobile alert that both overdraft violators and all consumers most want is a warning that an
overdraft is about to occur.
-Young consumers and the newly banked â consumers who opened their first checking account in the
past three months â are the most likely to incur overdraft fees due to their inexperience with banking.
-Consumers cite âtoo many feesâ as the No. 1 reason they leave their financial institution.
âThe last thing a bank should do is alienate a new â and especially an inexperienced â customer by automatically imposing a hefty fee when they have overdrafted on a one-time debit card transaction or at their ATM,â said Mark Schwanhausser, Senior Analyst, Multi-Channel Financial Services. âInstead, the bank can send them a mobile alert, which empowers the consumer to choose what action to take to avoid overdrafting such as transferring funds from another account or paying in cash. By working with the consumer, the FI can reap the added benefits of reducing fraud costs, creating future cross-selling opportunities, and building customer loyalty.â
Javelinâs Reg E and Overdrafts report is based on consumer data that Javelin collected online from 5,211 respondents in March 2010. The survey targeted respondents based on representative proportions of gender, age, income and ethnicity compared to the overall U.S. online population. Clients that purchase Javelinâs newly announced Bank Benchmark service may also obtain per bank comparisons of this data related to diverse areas ranging from overdraft fees to mobile service adoption.
About Javelin Strategy & Research
Javelin provides superior direction on key facts and forces that materially determine the success of customer-facing financial services, payments and security initiatives. Our advantages are rigorous process, independent position and expert people. For more information about this or other Javelin reports, please visit www.javelinstrategy.com/research or contact Liz Travers at (925) 225-9100 ext. 31 or [email protected]