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Overdraft Privilege Myths Debunked

Posted by Jeff Harper, President, BSG Financial Group on Aug 16, 2016 11:59:28 AM

Most financial institutions acknowledge that overdraft fees represent a remarkable source of non-interest income. What may not be clear to some is the fact that overdraft privilege programs are more than just a source of revenue. Recent data suggests that the service offers as much of a benefit to the consumers who use it as it does to the institutions that provide it. 

Consumer Financial Protection Bureau (CFPB) director Richard Cordray has said on many occasions that his agency is not looking to do away with overdraft services (but is instead leaning toward minor changes in how institutions manage the programs). As such, it doesn't appear overdraft programs are going away. 

So how should community institutions view overdraft privilege in the current environment?

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Topics: Courtesy Overdraft, Compliance, Overdraft Protection, CFPB, overdraft privilege

Digital Lending Q&A: Part Two

Posted by Michele Rehm, Marketing Manager on Jul 27, 2016 4:02:33 PM

This is the second installment of our blog series, Digital Lending Q&A (read Part One here), featuring questions and answers from our popular webinar, Digital Lending for Financial Institutions. 

If you have questions of your own regarding Digital Lending, feel free to submit them in the Comments box below and we will answer them right away.

Is there any human intervention prior to funding the loan?

The level of human intervention in the loan approval process can be defined by your institution. 

The MinuteLender technology can automatically approve individuals and small businesses for loans based on your institution's underwriting and risk tolerances with a matrix. Alternatively, your institution can employ processes after the submission of an application to add steps for final approval. For example, some community institutions like to personally review the loan accounts before completing and funding the loan. The MinuteLender platform provides the flexibility to be tailored to your institution's objectives. 

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Topics: Digital Lending, Digital Lending Underwriting

Digital Lending Q&A: Part One

Posted by Michele Rehm, Marketing Manager on Jul 6, 2016 11:11:14 AM

BSG Financial Group recently conducted an educational webinar called Digital Lending for Financial Institutions. It was our most popular session to-date, so we thought it would be helpful to share some of the questions attendees asked as well as our answers. 

We will feature several more questions from this popular webinar in a series of blog posts to follow. If you have questions of your own regarding Digital Lending, feel free to submit them in the Comments box at the end of this post and we will answer them right away.

What loss ratios can we expect with online lending?

We often get this question, and the answer is: if you’re using the same criteria for online lending as you do in-branch, the losses are going to be the same. The MinuteLendersystem for business and individuals provides the loan delivery platform, but it uses your institution’s guidelines for underwriting rules.

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Topics: Cloud Software, Digital Lending, Cloud Safety

Dynamic vs. fixed overdraft limits: And the winner is…?

Posted by Jeff Harper, President, BSG Financial Group on Jun 21, 2016 10:25:07 AM

In this corner… the Contender, Fixed Limits, challenging the formidable upstart, Dynamic Overdraft Limits….

Indeed it may seem like you’re in a boxing match when deciding which type of overdraft limits you will offer in your automated discretionary overdraft program.

Both types of limit-setting strategies enable your institution to automatically allow or disallow overdrafts for those account holders who utilize your service.

The Contender:
FIXED LIMITS provide a “one-size-fits-all” approach that is determined at account opening. All account holders who qualify to be in the program, receive the same overdraft limit; OR the limit varies based on account type (i.e., $550 for Free Checking and $750 for Premier Checking).

The Challenger:
DYNAMIC LIMITS are calculated automatically based on a myriad of account holder data points, including specific deposit and overdraft activity, related balances and more. This data enables your institution to establish a risk profile for each account and assign individualized overdraft limits based on the account holder’s ability to repay the overdraft and fees at any given time.

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Topics: Overdraft Compliance, Overdraft Management, Dynamic Overdraft Limits

Is Your Third-Party Overdraft Provider a Partner or Just a Vendor?

Posted by Michele Rehm, Marketing Manager on Jun 8, 2016 11:19:01 AM

First of all, let us be clear: we do not think vendors are bad. Third-party vendors play a valuable role in most financial institutions’ everyday operations.

However, from our perspective, a vendor relationship and a partner relationship are not the same; and when it comes to your overdraft program, a vendor just won’t cut it.

Managing a service that generates such a large percentage of your institution's overall non-interest income requires a true partner to your company. This partner should work as an extension of your business understanding and anticipating your goals and needs.

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Topics: Overdraft Protection, Overdraft Provider, Provider Patnership

PaySound® Allows Financial Institutions to Offer Checking Account with No Overdraft Fees... Ever!

Posted by W. Barrett Nichols, founder & CEO on May 24, 2016 11:07:38 PM

Right on the heels of our latest product release, I am pleased to unveil the addition of another revenue-generating solution for financial institutions: PaySound®—the online checking account that does not allow overdrafts.   

PaySound combines a full-service, mobile-ready checking account with an optional line of credit (from $500 to $5,000) for those of your account holders who do not want to incur even a single overdraft charge. These account holders may have opted out of your discretionary overdraft program or they use alternative sources of short-term funding. 

For whatever reason, they do not want their financial institution to allow them to spend more than they have in their accounts; and recent research shows that many of them are willing to pay for the certainty of no overdraft fees.

PaySound helps your institution provide that assurance, extremely quickly and inexpensively, while offering a simple back-up funding plan in case of emergencies or when they fall short. The system never assesses an NSF (non-sufficient funds) charge even for returned ACH (Automated Clearing House) and check items.

The program creates a new stream of income for your institution from the account's monthly charge, interest and debit card interchange fees, at a time when revenue-generation and profitability are paramount. It also helps your institution address the Consumer Financial Protection Bureau's (CFPB) directive to allow greater access to checking account alternatives, especially those that do not permit a consumer to overdraft.

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Topics: News, Company News, Digital Lending, PaySound, Overdraft Fees

Community Banks Can 'Up Their Game' With the Right Digital Lending Partner

Posted by Jeff Harper, President, BSG Financial Group on May 18, 2016 8:00:55 PM

American Banker published another article last week about the opportunities that exist for community banks to enter the digital lending space, which is now almost exclusively dominated by marketplace lenders, such as LendingClub and others.

Marketplace lenders are the online outlets that pair borrowers and lenders through the use of a digital platform without a traditional bank intermediary—often underwriting and delivering loans outside traditional “bank,” “debt capacity,” and “coverage ratio” underwriting and pricing. They are generally considered rivals to community banks, siphoning off customers who choose convenience over often high interest rates (some as high as 29%).

The article, entitled, "Marketplace Lending Was Just What Banks Needed" points out that, despite some recent bad publicity, marketplace lenders have succeeded in filling the needs of consumers who crave the convenience of being able to apply for a loan digitally and get funds quickly. Their focus on automating the small business lending process has helped them double their outstanding portfolio balances every year since 2000.

Their success has forced community banks to 'up their game' and become part of the digital revolution.

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MinuteLender™ Helps Financial Institutions Deliver Loans Online and in Minutes to Consumer and Small Businesses

Posted by W. Barrett Nichols, founder & CEO on May 10, 2016 8:28:39 PM

I am pleased to announce that our company has added MinuteLender™ and Business MinuteLender™—online lending platforms for consumers and small businesses, respectively—to our suite of revenue-enhancement solutions for financial institutions. 

Using the MinuteLender technology platform—under your financial institution's brand and control—account holders are able to get approval and account set up of small dollar, unsecured loans in just minutes. The entire loan application process can be accessed and completed on a computer or mobile phone, vastly improving the lending experience.

The automated, digital technology allows your institution to enjoy efficiencies never before available in processing, underwriting, and booking smaller loans for your account holders. These efficiencies help you grow your loan portfolio, increase revenue, and meet the expectations of the digitally-connected consumer.

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Topics: News, Company News, Digital Lending, MinuteLender

Don't Be a Deer in the Headlights When it Comes to Providing Overdraft Protection

Posted by Michele Rehm, Marketing Manager on May 3, 2016 9:38:39 AM

Regulators have shined a (BRIGHT!) light on overdraft protection, but acting like a ‘deer in the headlights'—waiting to implement a program or running a program that has not been updatedis costing your financial institution service and income opportunities. The Consumer Financial Protection Bureau (CFPB) will likely make some changes to how financial institutions manage overdrafts, but make no mistake, overdrafts are not going away.  

Managing them in a way that is optimized to put the consumer first will serve your institution well not only with regard to regulators but in revenue generation.

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Review 'Fourth-Party Vendors' To Reduce Financial Institution Risk

Posted by Michele Rehm, Marketing Manager on Apr 21, 2016 7:00:00 AM

Just when you thought you had your arms around your vendor management program, auditors and examiners are now inquiring about your vendor’s vendors—or "4th-party vendors" as we refer to them in this discussion.

Why are 4th-party vendors important to your institution's safety?

Like you, your 3rd-party vendors are deeply reliant on some of their vendors, and these are the ones you need to concern yourself with to some extent. These vendors show up in your vendor’s SSAE-16 reports and should also be easily identified by your vendor as those classified as critical in their own vendor management matrix.

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Topics: Compliance, Vendor Management

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