Market Forces Have Raised the Stakes for ODP – Things to Consider
February 16, 2022
4 minute read – Competitive pressure on Overdraft Protection (ODP) has become immense. What started as an incoming tide in mid-2021, has turned into a tsunami of pressure at the start of 2022 as more financial institutions are creating market pressure by completely revamping their position with respect to these types of fees.
The growing stress on this revenue stream comes on top of more general earnings pressure many are anticipating they will feel this year.
Given this, leadership teams need to move more quickly than they hoped, while also being intentional in their positioning, decision-making, and communication on ODP and Non-Sufficient Funds (NSF). Below are just a few questions to consider as your teams grapple with this.
- What is the current purpose of your fees? For example, are your fees intended to provide a valuable service, change behavior, or a blend of both? Could you defend your fees if someone from the press called your CEO and started asking tough questions or if you got unfairly hammered on social media? This kind of pressure is already being seen on ODP in particular. Keep in mind that the consumer may not really understand the nuances of some of these new programs being announced, so perception matters.
- What if you built these programs from scratch? Ask your team to envision how you could structure your programs if you built them from scratch. Try not to judge why they are using them and note any biases and assumptions being brought into the conversation. Dig deep into your data to gain a better understanding of the “whys” and “hows” of your customers’ usage. Many teams are surprised by what they are learning as they delve into their data. But don’t stop there. Ask your team to imagine why and how this usage could change as they look to the future.
- What is the value proposition? The hyper-focus on ODP and NSF is now a high-stakes game, making it critical to clearly articulate your programs value proposition. Whether you keep your programs the same or redesign them, it can be valuable to create a mock press release about it. This process can help the team reach consensus on the true value proposition. If you and your team are not excited about the value proposition, continue to push because the market forces and related PR don’t appear to be going away anytime soon.
- What do we need to do now to make up for lost revenue? If you ultimately decide to redesign your programs and it materially reduces revenue, ask your team to identify and prioritize options and timing for replacing the lost revenue. Make sure to use your ALM model to run various scenarios under a range of economic outlooks. Keep key stakeholders in the loop. Timely communication of new positioning, programs, and potential financial outcomes is a huge key to success.
This issue, especially in conjunction with other pressures, may feel overwhelming at times. Keep in mind that on the other side of problems are opportunities. The point at which you address a problem is directly related to the number of viable options you have to solve it.