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The Changing Face of Consumer Checking

The Changing Face of Consumer Checking

The current environment of unprecedented regulatory change is driving a fundamental shift in the checking landscape — with a renewed focus on creating value in the consumer relationship

The impact of far-reaching financial legislation and regulatory change is creating the need for financial institutions to re-evaluate their checking business models. Institutions today are beginning to move away from the acquisition-oriented mindset of the “free checking” era toward building new revenue streams grounded in the value of the services they provide to account holders.

The Legislative Effect on Revenue

Regulation E initiated a whirlwind of activity as financial institutions prepared to comply with the overdraft opt-in requirements and protect this important source of fee income. Even as Reg E-related efforts to maximize opt-ins continue beyond the effective dates, the focus will shift more heavily toward revenue generation in order to replace lost fee income. While estimates vary widely depending on financial institutions’ current policies and the effectiveness of their opt-in initiatves, the need to offset lost income is critical. The Banc Investment Group estimates Reg E will reduce fee income for many institutions by up to 10 percent or more.1

Further impacting the consumer revenue picture for financial institutions is the financial overhaul bill (Dodd-Frank Act), which requires the Federal Reserve to establish standards that ensure debit card interchange fees are “reasonable and proportional” to the costs of delivery. Although it is uncertain how this will be defined, financial institutions could stand to lose 50 percent or more of interchange revenue, translating to an annual decline of more than $5 billion, according to PaymentsSource.2

Checking Changes

The stage is set not only for broad-based changes in consumer checking, but also for product innovation and differentiation. According to Diane Merrifield, principal of Minneapolis-based Mindbridge Marketing, “We’re already seeing evidence of these changes unfolding, with the introduction of a new generation of checking products designed to add value, reduce costs and increase revenue. While perhaps driven by regulation, financial institutions now have the very real opportunity to rethink their strategic approach to consumer transaction-based products and services to one that provides value to account holders and enhanced contribution to the institution.”

Some of the emerging checking offerings include:

Much is yet to be determined regarding the financial impact of recent regulations — and how checking will look in the future. But financial institutions of all sizes now face the need to develop new strategies based both on what consumers want and what will provide enhanced revenue generation for their organizations.

What Consumers Want in a Checking Account chart

Products and Services That Replace Fee Income, Add Value and Strengthen Relationships, and Reduce Expenses chart

For more information about how Harland Clarke can help support your checking strategies, contact your account executive or visit