When it comes to overdraft protection, Bank of America Corp. is learning customers really do want a say in the matter.
The bank is considering a new text message feature that would allow customers to elect overdraft coverage on an individual debit transaction at the point of sale if they happened to be short on funds. Though the concept is still in the early stages — it won't be tested on a broader level in the market until early next year — it marks a shift in the way B of A approaches the overdraft issue.
In March of last year, B of A made waves for becoming the first, and subsequently only, big bank to adopt a blanket policy to deny debit card purchases at the point of sale if a customer did not have enough funds in his or her account to cover the purchase. The change was made ahead of regulation requiring banks to give customers the ability to opt out of overdraft coverage and potentially avoid paying 30-some dollars in fees for making small-dollar transactions.
At the time, B of A stressed that its decision to block debit card purchases that would overdraw an account was in response to feedback from customers that they did not want to spend money they did not have. (The decision was also lauded by Treasury Secretary Timothy Geithner, who encouraged other banks to follow B of A's lead.)
Other big banks countered that they would continue to give customers a choice.
"We are not going to tell consumers what they are supposed to do and we're not going to tell them what they are supposed to think," said U.S. Bancorp Chief Executive Richard Davis at the time.
It seems B of A may have underestimated the power of choice.
Speaking at an RBC Bank financial services conference on Friday, Laurie Readhead, B of A's retail segment executive, said the bank has seen "a significant improvement in our customer experience since implementing the overdraft policy," including fewer customer service calls, fewer complaints and fewer customers closing their accounts.
However, the bank has also gotten feedback about customers wanting more options and more control.
"For the most part, they don't want to go back to the experience that they were having before, where they were consistently incurring multiple $35 fees," she said. "We think the text message solution is a much better approach to let the customer choose, because the customer still wants to choose whether or not they want to proceed with the transaction. So we're very much focused around that notion of choice and letting the customer choose versus a broad-based, opt-in approach."
How the text message service would work is if a customer's debit card is declined at the point of sale, he or she would instantly receive a text message that alerts the customer that the reason for the decline is because of a lack of sufficient funds in the account to cover the transaction. The customer would then have the ability to respond to the text to say whether he or she wants to accept an overdraft fee and proceed with the transaction.
"So rather than reversing the whole decision, we're looking at an alternative that lets the customer stay in control because that's the feedback we get from our customers," Readhead said.
