Brookfield-based Fiserv Inc. has introduced its new Revenue Expansion program, which is designed to help banks and credit unions introduce new products for customers, improve profitabity and meet new Regulation E federal guidlines related to debit card and ATM overdraft protections.
The Regulation E guidllines were passed last November by the Federal Reserve Board and took effect on July 1. They prohibits financial institutions from charging overdraft fees on debit card purchases or ATM transactions unless customers opt into an overdraft program. Because overdraft fees generated an estimated $30 billion for financial institutions, some banks and credit union could face lower profitability because of the rule change, Fiserv says.
“Financial institutions must act to address the new realities of deposit economics and find sustainable revenue sources that will replace lost fee income,” said Patricia Hewitt, director of debit advisor services with Mercatory Advisory Group Inc., a Maryland-based research and advisory firm that serves clients in the financial services sector.
“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.”
The Revenue Expansion program has identified new deposit products, including alternatives to free checking, that financial institutions can introduce to attract new customers. It also identifies cross-selling and retention products to assist banks and credit unions in retaining existing customers.
The program also discusses methods for banks to create specialized programs for clients who opt into new overdraft protection programs, as well as other programs that banks can design to serve customers who do not opt into overdraft programs. For instance, Fiserv suggests that banks could develop short-term, small dollar loans for customers who opt out of overdraft protection, where deposit history is used for qualification, rather than credit score.
