The power of segmentation and personalization in overdraft communications

In today’s highly digital, data-driven environment, consumers have come to expect personalized attention from the company’s they engage, including their credit union. 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, credit unions can generate better response rates, as well as increase loyal member relationships. And thanks to modern technology, this one-to-one communication can be created dynamically based on your member’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 members and helps manage risk.

Whether a credit union 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 credit union? Do they look generic and unappealing?
  • Are you able to identify members 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; Member Overdraft Repayment Capacity; and Other Changes in Account Activity?
  • Do you communicate the relevant message using the member’s preferred channels of communication (i.e., call/email/letter/text)?
  • Are you able to determine the best time to engage the member 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 members at a credit union 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 member 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 credit union’s policy to send a standard 10-day overdraft letter to both consumers. However, in the latter case, the credit union may want to forgo sending this generic notification, which will probably arrive to the member 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 credit union does not have a relevant relationship with its member.

The bottom line.

Dynamic, personal overdraft communications help credit unions enhance and solidify the member 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 credit union to send only those messages that are necessary. In fact, according to our client data, these tailored communications, can help credit unions 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 members 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 credit union has the opportunity to provide exemplary service by acknowledging the event, educating the member 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 a credit union representative

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

Jeff Harper

Jeff Harper

Jeffrey Harper brings more than 25 years of industry experience to his position as president of ​BSG Financial Group. ​ where he heads up the Sales and Marketing divisions of the ... Web: Details

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