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How to Improve Your Bank's Non-Interest Income
by John M. Floyd
Question: Our bank's non-interest income from credit and debit card transactions has been decreasing lately. Is there anything we can do to offset this decrease?
Answer: You are right to be concerned. There are two market forces that are putting this almost annuity-like stream of income at risk. The first is the lowering of transaction fees by various market competitors making it almost mandatory for banks to lower transaction fees to remain competitive. The second trend is merchant preference for debit based transactions versus the past practice of processing debit transactions as credit card transactions and paying higher processing fees.
It is virtually impossible to combat competition or change merchant processing; however, one way banks can respond is by increasing the bank's debit transaction volumes. Here are two ideas to consider:
- Delve into your database and look at your inactive debit cards and those that have minimal usage. Increase your marketing and education programs to encourage these accountholders to start using the cards. Once accountholders experience the convenience, it will be hard for them to stop.
- Implement a debit loyalty program to encourage the use of debit transactions by your accountholders. There are a number of different structures to consider, but one thing is clear -- loyalty programs, when marketed well, do render more transactions.
These two steps should increase your debit transaction volumes and more than off-set fees lost to competition and merchant processing. Anything that increases customer satisfaction because of convenience while increasing non-interest income for the bank is an opportunity worth pursing!
JMF Boilerplate
John M. Floyd & Associates (JMFA) is a leading vendor of overdraft privilege programs serving more than 2,000 financial institutions in 49 states and Central America. JMFA is also nationally recognized for training, account acquisition and earnings enhancement programs, as well as product, service, pricing and technology improvement consulting. To learn more about John M. Floyd and Associates and to receive a FREE Overdraft Privilege Analysis, please visit www.JMFA.com or call 800-809-2307.
First published on BankersOnline.com 8/21/06
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