Exhibitors and attendees packed the Crowne Plaza Hotel in Cromwell on Tuesday for the BankWorld 2007 conference.
A flat yield curve has raised banks’ interest in non-interest income.
About two dozen of the estimated 800 attendees at Tuesday’s BankWorld 2007 conference sat in at a session to listen to one option in particular: the Overdraft Privilege service from Houston-based financial services and profit-engineering consulting company Strunk & Assoc.
“Margins continue to be compressed,” said Thomas Dufner, vice president of Northeast region sales for Strunk & Assoc. “The costs of funds are rising.”
His company’s overdraft service generates income for banks via fees assessed if an account holder – specifically, one who is participating in the program – writes a check, or makes an ATM withdrawal or other payment or withdrawal request for more than the funds available in his account. There is no annual fee for the program; the fee comes only when the overdraft service is used.
Banks offering the service to their clients have seen an increase in revenue that ranges between $75 and $150 per account annually, according to Dufner. Typical non-sufficient funds, or NSF, fees run between $25 and $40, he said.
Designed as a selling point for banks to attract, retain and grow profitable account relationships, Dufner described the program as “a significant and constant income source.”
To illustrate the difference the program can make for consumers, Dufner gave an example of a bad check presented to a retailer. The bank would return the check to the retailer, resulting in a typical $35 NSF fee, he said. Retailers often resubmit returned checks, and if funds have not been deposited it results in the check being returned again, along with another $35 NSF for the account holder, he said. The account holder would then likely have to return to the retailer to pay for the merchandise and the retailer’s own returned check fee, he added.
But if the account had the overdraft service, the check would have been paid the first time the retailer presented it, and the account holder would have been charged only one $35 fee by the bank, Dufner explained.
Strunk & Assoc. has recommended guidelines for the program, such as caps of $800 and $1,500 for consumers and small businesses, respectively. The company also recommends implementing a 30-day waiting period on new accounts before making the service available.
A New Service
Dufner also touched on a new service Strunk & Assoc. is offering, Reward Checking. Like the Overdraft Privilege service, Reward Checking is designed in part to help banks find non-interest sources of income.
The program offers consumers high interest rates and refunds on all ATM fees while including certain requirements made to create income for the bank.
Some of those requirements include using direct deposit – to cut down on the bank’s processing costs – and making a minimum number of debit card transactions, as the bank collects check card transaction fees.
Offering a higher interest rate compels consumers to move their deposits from other accounts, meaning larger balances for the Reward Checking accounts, Dufner said.
An end-of-the-month snapshot from a Strunk & Assoc. client shows that the average balance of customers with Reward Checking accounts was $8,664. The average check card transaction fees and spread earned on deposits were $5.97 and $52.78, respectively.
Enrollment in the Reward Checking plan also typically requires customers to switch their monthly account statements from paper to the electronic format. That switch alone can mean the difference of $2.50 per account per month to between 10 and 20 cents per account per month, Dufner said.
The increasing reliance on technology was a common theme at Tuesday’s BankWorld event.
“Technology is driving so many parts of the [industry] these days,” said Lindsey Pinkham, senior vice president and secretary of the Connecticut Bankers Association. Held at the Crowne Plaza Hotel in Cromwell, BankWorld was put on by CBA and The Warren Group, parent company of The Commercial Record.
The larger presence of technology companies at BankWorld is a reflection of that trend, he added. Some area tech firms exhibiting included Avon-based COCC, Glastonbury-based Open Solutions Inc. and Farmington-based Enlighten.Net.
In all, the event had 72 exhibitors at 76 booths, said CBA Vice President Colleen Clancy. With the exception of one or two booths, the exhibition space sold out two months before attendees came through the door, she noted.
Projected attendance was expected to reach 800, topping last year’s mark of 781, Clancy added.
Pinkham said there were between 85 and 100 walk-ins at the event, and that he has received positive feedback from both attendees and exhibitors.
“I think that it went very well, and was well attended,” he said.
