In case you missed out... listed below are BSG Financial Group's five most popular blog posts of 2016. Loads of people have already read them and we wanted to make sure you did too! Take a look to get "in the know" and feel free to pass them along!
It used to be that one of the worst critiques your boss could deliver was accusing you of “having your head in the clouds.” You still don’t want your head there, but for more and more financial institutions, having your data and operations in the cloud is just good business.
As traditional computing methods continue to deliver decreasing profits, it will become even more apparent that it is in your organization's best interest to locate and use a properly hosted cloud-based vendor.
Here are three reasons why...
Now that the election is over, there is much speculation about how a Trump presidency will impact our industry. Most everything we read is positive, especially about the future of automated overdraft programs.
In particular, we are encouraged by:
- Recent news articles regarding the future role of the CFPB
- Trump's promise to eliminate two regulations for every one enacted, including bank regulations
- A recent Federal Reserve-sponsored webinar that suggested the regulatory bodies are not looking for a major overhaul in overdraft programs, but instead are focusing on the inner workings of an overdraft program.
Like many financial institution executives this time of year, we at BSG Financial Group have recently participated in numerous industry trade shows and conferences.
In a two-month period beginning in August, we exhibited at or participated in a plethora of conferences, including those sponsored by the Financial Managers Society (FMS), Association for Financial Technology (AFT), Virginia Association of Community Banks, the Bank CEO Network Conference, Jack Henry Banking... to name a few.
Attending these events is very important to us, as they connect us with customers and potential customers alike. More importantly, they give us an opportunity to learn first-hand the most pressing challenges for financial institutions, while validating and ensuring that we offer the programs and services to effectively address these concerns.
Listed below are three of the top challenges that financial institutions face—as told to us by financial executives at these recent conferences—as well as our responses/solutions:
When the app-based driver service Uber hit the streets in 2010, it quickly siphoned off a large percentage of business from the taxi industry. Uber won over taxi riders with its on-demand response and digital delivery method.
Today, the same thing is happening with Online Lending and your customers.
In record numbers, consumers and small businesses alike are getting the short-term loans they need from online, non-bank lenders like LendingTree and OnDeck—preferring their rapid approval and delivery to traditional lending methods.
Unless you innovate like Uber, your institution could lose up to 60% of your retail and small business profits to non-bank entities in the next five years, according to a study by the consulting firm McKinsey & Company.
The industry advisory firm Bain & Company concurs, saying, "Banks need to accelerate investments in digital lending if they are to avoid a material decline in profits and loss in market share."
An August 17, 2016 article entitled, “Disparate impact studies especially tough on dynamic matrix systems,” caught our attention. The article, in our opinion, attempted to cast a negative light on “overdraft matrix systems” or overdraft processes that can cause a customer’s discretionary overdraft limit to change from time-to-time based on the risk profile of the customer.
On Friday, July 22, 2016, the Consumer Financial Protection Bureau (CFPB) published proposed rules and a request for public comment to establish a new consumer regulation that would regulate payday loans, vehicle title loans, and certain high-cost installment loans (“Covered Loans”).
The Bureau is particularly concerned that some lenders of Covered Loans fail to assess the consumer’s ability to repay the loan; it is also concerned with the practice of withdrawing loan payments directly from the consumer’s accounts.
For financial institutions seeking reliable and safe sources of additional fee income, this news is welcome indeed.
The current state of the overdraft industry can be summed up in one word, “WAITING.”
BSG Financial Group hears from some institutions that they are delaying offering an overdraft privilege program until the Consumer Financial Protection Bureau (CFPB) decides how financial institutions must manage consumer and business overdrafts.
This waiting reminds us of a quotation from the novelist Morris West who wrote, “If you spend your whole life waiting for the storm, you'll never enjoy the sunshine.”
We—banks, credit unions and service providers—have all been waiting for more than two years for the regulatory agency to finally announce its conclusions. Now it looks like mid-2018 before any material changes might occur. And even then, the changes recommended by Pew Charitable Trust (hired by the CFPB to handle the research aspects of their regulatory review) seem rather minor: revised disclosures, reasonable fees, and standard posting order.
In the meantime… while we wait, your account holders seek short-term liquidity elsewhere and your bottom line pays the price.
BSG Financial Group will present a webinar entitled, "The 5Ds of an Optimized Overdraft Management Program," on Thursday, September 15 at 2:00 pm EST.
The FREE webinar, hosted by CPA firm Porter Keadle Moore, will outline the essential elements of a modern overdraft privilege program that provides world-class service to account holders while managing risk.
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?