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LenderHub

SWBC's LenderHub blog is a one-stop resource for lenders.

 

Why it's Beneficial to Retain Customers with Overdrawn Accounts


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Today’s uncertain economic conditions and the lasting effects of the credit crisis have left financial institution executives scrambling to develop and implement consumer retention strategies to drive revenue. Today’s tech-savvy consumers expect convenience, personalized service, competitive fees, and rewards. Their receptiveness to Fintech to perform services which were historically trusted only to the traditional financial institutions, is another challenge facing the financial services sector. However, institutions that add value to the lives of their consumers through savvy decision making and marketing, innovative product development, and success tracking are rewarded with loyalty.

Some credit unions are serving customers better than ever before, and the results are impressive. According to Peer-to-Peer Analytics by Callahan & Associates, the average member relationship for U.S. credit unions has increased 4.4%, since 2011, its highest level ever.  U.S. credit unions have also seen a share draft increase of 7% since 2011. By forming stronger and deeper relationships with their members, these credit unions are increasing memberships and retaining customers at an impressive rate.

To increase your retention rate, it’s important to look at every aspect of retaining consumers, and one that is often overlooked are consumers with negative share accounts. Often, a financial institution gives up on this opportunity and is forced to close the account, mostly because they don’t have the resources to facilitate a call out campaign. So, what if you could retain customers that you might otherwise lose? Collecting on overdrawn accounts is never a desirable task, but we all know that delinquent loans and accounts, and the necessary collection efforts to resolve them, are an inevitable part of the financial institution’s processes. While most financial institutions don’t put collecting on overdrawn accounts at the top of their list of priorities, there are several reasons you should.

1. It’s less expensive than acquiring new business

Salvaging relationships with consumers who have negative balances is typically much less expensive than acquiring new business. In fact, acquiring new business costs about five times as much as retaining existing customer relationships.

2. Avoid the negative impact of losing a consumer

If a consumer walks away from an overdrawn account you could:

  • Lose any future business and revenue opportunities with that customer

  • Experience a loss of reputation if the consumer feels he or she was not fully informed throughout the process or given a full opportunity to rectify the matter

  • Damage your consumer’s ability to open another checking account for up to seven years—perhaps due to a simple misunderstanding

3. Avoid financial losses

Much like loan delinquency, when it comes to overdrawn checking accounts, avoiding charge-offs is critical to keeping losses low. With all consumer accounts, the obvious goal is to create income rather than experience a financial loss. Further, resolving these accounts gives you the financial benefits of reengaging these consumers for potential product sales in the future once their financial situation is more secure.

Preserving the relationships with all of your consumers—even the ones who may have let their accounts slip into a negative balance—has many benefits, both monetary, and non-monetary.

SWBC offers account retention services to help you collect overdrawn funds and re-engage your customers. Click here to learn more about these services.

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