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For banks and credit unions the source of revenue leakage is typically waived and refunded fees. Most organizations realize customer service and frontline staff attempt to put the customer first, and as a result waived and refunded fees happen. It’s worth it, right? Not necessarily. Over time, revenue leakage adds up and contributes to a significant loss in profit for a bank or credit union. How can your financial institution find the cause of revenue leakage?

Here are three explanations for why revenue leakage could be happening at your bank or credit union:

1. There is no policy set in place

Having a policy addressing when it’s appropriate to waive fees is vital in keeping revenue leakage to a minimum. It’s common for frontline team members to waive fees for upset customers instead of addressing the underlying issue of why the fee happened appropriately. For example, if a customer comes in complaining about a $25 overdraft fee, the banker will sometimes waive the fee to keep the customer happy. Without the policy as a guide, team members struggle with when and how often to waive fees. Often all fees will be waived when just waiving some of the fees would have satisfied the customer. Repeating this cycle throughout the institution can turn into a significant loss of revenue.

A financial institution should have a policy in place for not only employees in branches, but also customer service roles that interact with customers by phone or online platforms. This policy should identify the appropriate circumstances when waiving a fee is the best option and outline questions to ask customers that give the employees a better understanding of the problem to be able to provide alternative solutions.

2. There is a policy, but no one knows about it

In my experience, institutions often have a difficult time communicating policies to their team members. It’s important that financial institutions cover their bases to ensure their policy on revenue leakage is clearly defined and communicated to the entire staff. I recommend using multiple communication channels including email memos, print collateral and digital copies. I’d also suggest that managers or human resources review the policy with new employees as a part of the onboarding process. Training on the waiver policy is important and should occasionally be refreshed to all customer contact employees. Lastly, make sure employees have a way to ask questions about the policy by providing resources such as an employee hotline accessible by phone or email or an online knowledge base.

3. There is no accountability to be held to the policy

Even if an institution communicates their policy effectively to its employees, it does not mean employees are abiding by the policy. Often times, employees are not held accountable and continue to waive fees because it’s often easier than dealing with an upset customer or member. Due to this lack in accountability, revenue leakage can often go unnoticed until it makes an obvious impact on profit. It should be required for any role capable of waiving fees to submit the waived fee in the appropriate system for it to be documented. The waived fees should be reviewed regularly by management to ensure the reasons for waiving falls within the company’s policy. All fees should be assessed, and then refunds given if appropriate. This way the fees can be tracked through the GL and an accurate accounting of waivers can be done. All refunds should be tied to the branch/cost center that initiated the waiver or refund so total fee leakage can be tracked by department.

To avoid a significant loss in profit due to revenue leakage, ensure your bank or credit union has a policy set in place, communicates the policy effectively to employees and holds their employees accountable to abide by the policy. Identifying the sources of revenue leakage can take a lot of time away from management and leadership. Proper waiver/refund policy structure can help limit the amount of time that is spent reviewing fee leakage. If you think your financial institution is having an issue with revenue leakage I suggest hiring a third party to provide an unbiased report and recommendations around appropriate waiver policy in the industry.

Cameron Loughery

Senior Consultant
Hometown: Atlanta, Georgia
Alma Mater: Georgia Southern University
Big fan of the Georgia Bulldogs, GSU Eagles, and Atlanta Falcons. Enjoys getting out on the links and playing golf as well as staying busy in the gym. Loves grilling out and enjoying the warm weather.