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The Quest for Non-Interest Income


quest-for-non-interest-income-bodyIn the neverending quest for non-interest income, financial institutions can find themselves in a bind: income is necessary to run any business, of course, but lenders often feel that seeking out income and fees runs contrary to their customer service missions. Also, lenders tend to fear that adding or increasing fees and other charges may drive customers to competitors.

If your financial institution needs help justifying fees and other non-interest income, think about how those charges simply amount to fair compensation for value provided to your customers.

  • Without income, your institution would cease to exist and be unable to provide customers with any services at all.

  • Like any other business, it’s fair for financial institutions to charge for services that offer convenience and time savings.

  • Financial institution income benefits customers by defraying costs, decreasing loan rates, and increasing savings rates.

Sources of Non-Interest Income

Once your financial institution feels comfortable seeking additional non-interest income, the next question is how to generate that income. Here are some ideas for services that will deliver value to customers and non-interest income to your institution.

Fees for Premium Services

Businesses often allow customers to use a limited version of a service for free, then upcharge for a premium service; your financial institution can follow suit. For example, perhaps you could offer multiple service levels of identity theft protection, with a slight increase in price for each level. Customers decide which level they find most valuable and are charged accordingly.

Another option is to bundle services together at different price points. Consider aligning higher tech offerings, such as remote deposit capture, with premium checking accounts. Consumers understand that upgraded services command a higher price.

Financial Services

As part of your mission to serve customers, you can assist them in important financial matters, and fortunately, generate fee income as well.

  • Offer the financial protection of voluntary auto, home, and life insurance through your financial institution or a business partner who specializes in this arena.

  • Offer investments and financial guidance through a retail investment service that will work with customers to establish retirement and future goals, create estate plans, set up college savings plans, and fund investments.

Vehicle Warranties and Protection Products

Automobile warranties and vehicle protection products are a valuable addition for customers financing auto loans and a logical way to not only generate fee income at your institution but also mitigate risk.

  • Major mechanical protection extends automobiles’ warranty coverage, helping customers pay for major mechanical repairs as their vehicles age.

  • After a total loss or theft, Guaranteed Asset Protection (GAP) helps pay the difference between the insurance settlement and the outstanding balance on a customer's auto loan. Now, GAP with PowerBuy® adds protection against the cost of depreciation, assisting even those customers who made large down payments and/or have extended loan terms.

  • Recommend debt cancellation or credit life and disability insurance, which makes payments on outstanding loans in the event of the policyholder’s death or inability to work.

Collecting the fees your institution needs to survive, thrive, and provide outstanding service doesn’t mean compromising your mission. The services you provide are valuable and should be charged accordingly. Fortunately, there are a number of ways to create value while generating income and remaining true to your mission.

For help generating income through an improved auto lending program and tips for recognizing promising borrowers, download our free ebook, 2018 State of Auto Lending.

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