Blog

The power of segmentation & personalization in overdraft communications

Posted by Jeff Harper, President, BSG Financial Group on Aug 2, 2017 9:20:58 AM

This article was originally published on CBInsight.com.

email text image large.jpg

In today’s highly digital, data-driven environment, account holders have come to expect personalized attention from the company’s they engage, including their financial institution. They want businesses to provide relevant and desirable services and solutions based on their needs and they often switch companies when communications are generic and impersonal.

Unfortunately, seventy-nine percent of consumers consider their relationship with their financial institution to be purely transactional, according to an Accenture Consulting study. However, by delivering more meaningful engagement, banks and credit unions can generate better response rates, as well as increase loyal account holder relationships. And thanks to modern technology, this one-to-one communication can be created dynamically based on your account holder’s account activity and a myriad of other data points.

Applying the technology.

According to marketing automation expert Hubspot, delivering personalized messages to specific audiences at the right time is the holy grail of marketing. But this theory is not limited to marketing messages alone. The same philosophy can be applied to communication about operational activities, like overdrafts, which also improves engagement, maximizes collections, retains account holders and helps manage risk.

Whether a financial institution relies on internal resources, core-generated communications, or third-party software, it would be wise to evaluate how personal and dynamic these messages are and determine if there is room for improvement.

A few questions to ask:

  • Are your overdraft communications branded to your institution? Do they look generic and unappealing?
  • Are you able to identify account holders based on their overdraft and other account activities and automatically produce relevant, custom messaging?
    • These account activities include: experiencing an ATM/Debit Card Denial due to NSF; Overdrawn Balances; Days Overdrawn; Account holder Overdraft Repayment Capacity; and Other Changes in Account Activity?
  • Do you communicate the relevant message using the account holder’s preferred channels of communication (i.e., call/email/letter/text)?
  • Are you able to determine the best time to engage the account holder to enhance response and collections?
  • Do you identify frequent ‘overdrafters’ and provide counseling alternatives and repayment plans?
  • Can you communicate about account activities other than overdrafts and keep a record of all engagement in a single repository?

To further illustrate what we are talking about, let’s pretend that two different account holders at a financial institution are both 10 days overdrawn. One has made no deposits in that 10-day period and has, in fact, incurred several more NSF items. The other account holder has made two deposits over the past 10 days, and his history indicates he typically cures his account within 15 days or less. It is the institution’s policy to send a standard 10-day overdraft letter to both consumers. However, in the latter case, the institution may want to forgo sending this generic notification, which will probably arrive to the account holder after his account has been brought back into good standing. An ill-timed, impersonal letter of this kind is a wasted expense (printing/letterhead/postage/time), and it suggests the financial institution does not have a relevant relationship with its account holder.

The bottom line.

Dynamic, personal overdraft communications help financial institutions enhance and solidify the account holder relationship by providing relevant messages that are timed based on account behavior. In addition, these one-to-one messages can also reduce collection costs by triggering the institution to send only those messages that are necessary. In fact, according to our client data, these tailored communications, can help institutions lower direct mail costs alone by 20-40 percent.

Finally, data driven outreach can help increase Reg E decisions regarding overdraft protection on ATM and one-time debit card transactions. The key is having the ability to identify your account holders who have experienced such a denial AND have not made a decision about opting in to Reg E, and then contact them following the incident. In this way, the financial institution has the opportunity to provide exemplary service by acknowledging the event, educating the account holder on the reason for the denial, and offering overdraft alternatives. Our data shows that consumers appreciate this type of personal attention and will make a Reg E decision while having a personal conversation with an institution representative. 

To learn more about how dynamic communications can enhance your overdraft program performance, watch this on-demand webinar:

What Has Your OD Provider Done for You Lately?

 

Topics: Courtesy Overdraft, Compliance, overdraft communications, customer service