The new overdraft regulation will go into effect soon and will cost banks millions of dollars in lost revenue. Many banks are still scrambling to get as many customers as possible to opt-in, and many haven’t announced a broader change in overdraft policy. Simply complying with regulation is not enough to protect fee revenue. Banks need to develop a forward looking strategy to maintain profitability in this new regulatory environment.
Some like Bank of America and JP Morgan made sweeping changes to overdraft policy well before the new regulation took effect. While changing overdraft strategy is vital, their approach of modifying policy for all customers is not the best one. By changing policy quickly and uniformly there is no way to tell what impact it will have. The changes may significantly hurt profitability, and it will be very difficult to roll these changes back. (more…)