02 Feb 5 Tips for Increasing Non-Interest Income

Money in the Bank

We all know that banks generate income on interest, lending money, and collection fees. What many people don’t know is that banks also make money from other sources not related to interest.

This is where product specialists and bank executives earn their money, as it takes creativity and strong product adoption to make these non-interest revenue generators work and grow.

Below are 5-examples of things banks do to generate money from non-interest sources.  We also include tips on how to grow each.

  1. Debit Card Fees

Debit cards are perhaps the biggest non-interest revenue stream for banks. It is incredibly profitable for Visa, MasterCard and the bank of issuance.  As anyone who’s ever accepted a card payment before knows, there is a processing fee of between 2-5% on all transactions.  The issuing bank gets a portion of the processing fee in addition to a flat fee ranging between 10-24 cents.  There are federal regulations in place that limit the size of the fee banks can collect based on the banks size.  Big banks, defined as $10 billion or more in assets are capped at around 21 cents plus 0.05% of transactions.  Smaller banks with fewer assets can charge a higher percentage and flat fee.

Increasing this stream
The only way to do this is to increase the volume of customers with a debit card and how often they spend with that card.  Ever wonder why they advertise a seemingly free product so heavily? Well, now you know!

  1. The World of Fees (overdraft, processing, application etc)

If you weren’t sick of fees after the last point, let me try again.  Banks make money by charging you fees for account servicing and the always popular overdraft fee.  At Bank of America for example, that overdraft fee is $35.  Plus if you stay negative for 5-business days they tack on another $35.  Over the scope of many millions of people, that quickly builds bank profits quite nicely.

Increasing this stream
Offering overdraft protection so people can get what amounts to a small credit card built into their checking account is really how banks build this stream up.

  1. Subscription Services

Subscription services are bank offerings that charge on an ongoing fee per month, such as payroll services for example.  Many banks handle payroll for a set amount per month for each employee.

Increasing this stream
Many of these services are geared toward commercial customers like the payroll feature referenced above.  Ramping up B2B marketing and building relationships with those customers is the best way to increase this form of revenue.

  1. Free checking accounts

Free checking accounts are the hook on the end of the banks fishing pole.  They provide the in with customers and get people in the door.  The goal with these accounts is to play on the desire of most consumers to have all their financial services handled under 1-roof.  If you can be that roof with a free checking account, other more lucrative spending will follow.

Increasing this stream
While these accounts don’t generate revenue onto themselves, most banks are equipped to handle 2-3 times more accounts than they have.  Focusing on younger parents between 29-40 is a great way to target families, who will most likely open bank accounts for their children once they reach an age where they need one.

  1. Merchant Services (mobile payment, credit card processing centers)

As more people open small businesses, the need to process electronic payments continue to rise.

Increasing this stream
Much like subscription services, growing this sector is best accomplished when you target your marketing to the B2B sector.  Mobile payment options tend to target the younger and on-the-go businessman, so it may be a good idea to channel the marketing to the millennial crowd.

Want to know more about how banks generate money? Get a hold of 3degreeZ today.

We’re a digital brand marketing agency that specializes in distributing content to create leads and spike sales for a range of industries. We start by gathering insights via our unique Market Intelligence System.


Michael Medipor
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