Regions Bank overdraft account balances profitability with customer demand
The news: The Birmingham, Alabama-based bank has announcement a new current account, called “Regions under verification”, Which has no overdraft or insufficient funds (NSF) fees. The account comes with a monthly fee of $ 5 and can be linked to other regional bank accounts to provide free overdraft coverage to those accounts as well.
More on this: Regions Now Checking is the latest sign of a large backlash against overdraft fees:
- On the legislative side, a new state law in New York requires banks that maintain checking accounts to pay checks in order of receipt. It also gives depositors with bad checks due to insufficient funds the right to have smaller checks honored if a balance is large enough to cover them. Overdrafts have also been a major theme in recent Congressional hearings with CEOs of major banks, according to Banking Dive.
- On the Marlet side, an increasing number of banking players have deployed liquidity assistance systems that limit clients’ exposure to overdrafts. The two neobanks like Carillon and Varo and holders such as PNC and Fifth third offer these features. Other banks, like Ally– went even further and completely eliminated overdraft fees.
Regional supply is a particularly strong indicator of the pressure banks are under to bow to anti-overdraft sentiment.
- A June 2020 study of the top 20 banks by 2019 total overdraft and NSF commission income revealed that these fees represented 17.7% of the regions’ non-interest income, making them the fifth most dependent on these fees according to this metric, according to Banking Dive.
The overview: The regions strategy of offering an overdraft account with a monthly fee is a middle ground approach that helps cover foregone fee income while easing the minds of customers.
- The new regions account looks like from TD Bank strategy to provide clients with an overdraft account — TD Essential banking services Account costs $ 4.95 per month, does not allow most overdrafts, and does not charge any fees on those that occur.
- It’s a balanced approach: while the fees associated with the account mean it hasn’t completely wiped out overdrafts without any caveats (as Ally did), it’s still easier to use. for customers as offers from other banks that attempt to minimize fees by giving customers cash assistance (such as PNCs Underbody mode).
- Following this line allows regions to offer overdraft-conscious clients an obvious option while lessening the blow to their bottom line from reduced overdraft income.