Bank of America and Citi are taking the higher-and less profitable-road by not offering fee-based overdraft protection to debit card users who exceed their available balance. But many other banks in the industry can't afford to abandon the entire revenue stream, leaving them with a marketing and technical challenge to get customers to opt in or out of overdraft protection by summer. "The folks who really live on these NSF fees, they can't afford to follow suit. They can't even think about it," says Bart Narter, Celent's senior banking analyst.

The technical and operational challenges posed by the changes to Reg E hit three touchpoints: marketing, or how to effectively reach those customers who currently drive the most NSF/OD revenue; compliance, how to receive and create an audit trail for the requisite opt in or opt out decisions; and core banking, how to integrate the rules associated with the new preferences into the bank's core processing application.

Alex Calicchia, evp and chief marketing officer at MidSouth Bank, says his institution outsourced most of the technical and operational tasks associated with marketing and compliance to a marketing vendor. The bank intends to aggressively market to the segment of its customer base that use the service most frequently. "For those active users, you'll see multiple touch points-branch, email, direct mail and calling," he says, noting that they're projecting opt-in rates in the 20 to 30 percent range. MidSouth's marketing vendor, CustomerStream, will handle the direct mail pieces, and is building a central lockbox to receive bar-coded mailed responses. The provider will then scan those cards, building an image database that can be used both for compliances purposes and to provide a feed of those who have opted in to MidSouth's core processor, Jack Henry. CustomerStream also built a Web applet to handle on-line opt-ins, and is handling all the necessary confirmation mail and email responses required by the regulation.

Customers who walk into the branch will be able to make their choice known to front-line personnel, who will enter it into an internally-built database, Calicchia says. That data will also be sent to CustomerStream to handle the confirmation and tracking piece, Calicchia says.

MidSouth's approach to blunting the effect of the Reg E changes is the prototype that marketing pros are advising. But mounting an integrated, multi-channel campaign requires technological sophistication that many banks don't have in house, "Only the largest banks, the top 50...have that level of sophistication of sending out customized marketing messages," Narter says.

Once the opt-ins or outs are obtained, and tracked for compliance, things get easier. Banks that use vendor-provided core processing platforms can rely on their core vendor to handle the heavy-lifting required in making changes to the core.

"It's another regulation they have to comply with, it's not rocket science from a programming standpoint," Narter says.

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