Three Ways To Boost Consumer-Friendly Non-Interest Income

ways to boost non-interest income

Net-interest margins are shrinking and it looks like margin compression is a challenge that isn’t about to let up. This pushes many institutions to drive revenue using non-interest income(NII). Here are three ways you can boost non-interest income (NII) in a way that maintains healthy consumer relationships.

 

Offer checking with cash back rewards

 

What is it? Cash back is a reward type that is typically only available through credit cards. Consumers receive a percentage of their purchases credited back to their accounts. As an example, imagine you offer a checking account that earns 3% cash back with a cap of $9 per cycle. If a consumer spends $200 in the cycle, they would receive $6 in rewards. If they spend $900, they would receive the cap amount of $9.

Why do consumers love cash back? Consumers rate cash back as the most desirable reward type, and they especially love it when you offer the reward tied to debit cards. Credit cards can be difficult to qualify for and younger consumers are wary of acquiring debt, but most younger consumers are using their debit cards regularly.

How does cash back drive NII? In a recent study, Kasasa found that cash back had an 84% lift in NII when compared to other free checking accounts, mainly through interchange fees. This reward type typically attracts younger consumers that have lower balances and higher transaction frequency. On average, they use their debit card 26 times a month and generate 31¢ in interchange revenue per transaction. The Kasasa Cash Back account is structured such that it also saves the institution money by requiring e-statement adoption and a minimum number of transactions per cycle (and even if they don’t qualify, the account is still free, while your institution doesn’t pay out any rewards). Controlling the earning rate, number of required transactions, and the reward cap amount gives you multiple levers to ensure this account type is profitable.

 

Provide overdraft privilege

 

What is overdraft privilege? Overdraft privilege is a type of overdraft protection that where the institution agrees to cover charges, up to a preset limit, if the account balance is insufficient. The account holder still pays a fee per transaction, but the payment isn’t refused.

Why do consumers love it? Consumers like overdraft privilege because it is less damaging to their finances than missing an automated payment. Imagine that a consumer has their electric bill set to autopay. This month, they don't have enough to cover the bill amount. What are the potential outcomes for the consumer?

  • Miss the payment. This results in NSF fees, late fees, and damage to their credit score.
  • With overdraft privilege, the transaction goes through and the consumer is assessed a smaller fee for the convenience. This transparency increases consumer trust with your institution.

Out of these scenarios, overdraft privilege is the most transparent and financially beneficial situation for the consumer.

How does it drive NII? The most obvious way overdraft privilege drives NII is through the fee applied when the service activates. It is important to consider the benefits of offering a consumer-centric transparent service like this: more consumers enroll, consumers feel more confident in managing their finances, and attrition drops.

 

Sell identity fraud protection

 

What is ID fraud protection? Thanks to myriad data breaches, most consumers are aware that their personal information is constantly at risk. Identity fraud protection is a suite of services that help safeguard personal information in the event of a theft or data breach, as well as assisting the consumer when their info is stolen, or exposed. For example, the Kasasa Protect service provides:

  • Credit reporting
  • Monthly credit score & plotter
  • 24/7 credit monitoring
  • Dark web monitoring
  • Full-service identity restoration
  • Lost wallet protection
  • email alerts / credit alerts
  • 24/7 dedicated kasasa protect support team

 

identity theft protection like kasasa protect drives non-interest income for banks and credit unions

Why do consumers love ID fraud protection? These types of services have a high perceived value and the cost to obtain this kind of protection through another brand anywhere between $15 - $30 a month. With Kasasa Protect, you can offer the same service for $7.99 a month. Beyond the cost savings, consumers receive monthly updates on their protection status (increasing stickiness) and see your institution as a partner in their financial well being beyond traditional bank offerings.

How does it drive NII? The price point for the consumer is $7.99, but the cost to your institution is much lower. That delta results in a stable recurring revenue stream that is safe from rising interest rates and other market trends.

 

Why bother with consumer-friendly NII?

If you can position your institution as a financial partner, instead of an organization that charges certain fees because “that’s how we’ve always done it,” you’ll earn a lot more loyalty and goodwill.

Andrew Swinney
Andrew Swinney