Executive Summary
While many credit unions are experiencing continued declining non-interest income, they are also faced with the looming threat of losing a portion of that income which is at risk of being significantly reduced or even eliminated. The potential loss of non-interest income from non-sufficient funds (NSF) fees and overdraft protection (OD) fees is becoming more of a reality due to increasing regulatory scrutiny and competitive pressure with more neo-banks and online-only banks no longer charging these fees.
In the following brief we analyze Q1 2024 data to provide a clearer picture of which credit unions will have a larger financial impact with the potential loss of this income and who is more or less reliant on these fees. We also explore the consumer side of this challenge in terms of how will the decision to no longer offer ODP impact members' financial health and their perceptions of their financial institution.
Credit Union Implications
All credit unions that are currently charging NSF or OD fees would have some level of impact both financially and from a member experience standpoint if they lose this income. As you will see in the following brief, some credit unions will have a bigger impact on their ROA than others. Factors such as asset size and location are explored to determine which credit unions will easily weather this storm and which need to act now. What's the right action to take that will replace the lost revenue while maintaining member service? Based on our analysis and case studies of two successful credit unions we include three potential paths forward to consider off-setting lost OD and NSF income. Ultimately there is no one-size-fits-all strategy, your credit union will need to determine the best path for your members and your financial stability.
