Uncovering Value in Customer Complaints About Overdraft Fees

A friend’s daughter was recently purchasing groceries when her debit card was declined. Embarrassed, she stepped out of the line to check her bank balance on her phone. As it turned out, she had an overdraft of $200 — and a $35 overdraft fee on top of that. In a linked savings account, she had more than enough money to pay for the groceries. But, it was too late. She hadn’t transferred the money over in time.

The overdraft fees that affect so many of us have become a hot topic of conversation, and this summer, the Consumer Financial Protection Bureau (CFPB) is reviewing the 10-year-old rule that sets limits on banks’ overdraft fees. This rule, which was adopted in the aftermath of the 2008 Financial Crisis, mandates that financial institutions issuing debit or credit cards must get customers’ permission before enrolling them in overdraft protection programs.

  • In 2018, bank customers paid a total of $11 billion in overdraft fees to US banks.
  • Today, bank customers incur an average of $35 in charges each time their accounts overdraft.

While the complaint issue categorized as “overdrafts and fees” is only a fraction (less than 5 bps) of all complaints submitted to the CFPB since 2011, companies’ responses to their customers drive much dissatisfaction. In fact, even when a customer is refunded for an overdraft charge, the customer may still have a negative perception of the bank.

With the PositivityTech platform, my team assessed over one million customer complaints in the CFPB database and homed in on customer complaints related to overdraft fees. By holistically studying this dataset and listening to customers’ voices, we identified findings that make it possible to predict future overdraft fee issues and define preventive actions that can impact customer satisfaction, regulatory relationships, and financial performance.

Listening to Our Customers’ Complaints About Overdraft Fees

First, let’s explore three real-life examples of customers’ complaints about overdraft fees:

When I opened my savings and checking accounts, I specifically requested [the bank] to not allow overdrafts in my accounts… Selecting this option gave me peace of mind since I knew that if I wanted to pay for something but I didn’t have enough money, [the bank] would just decline the transaction and I would know I was running low on my balance. [But] some payments using my savings account were not only not declined, but a ridiculous number of overdraft fees were charged to my account. I did not notice anything because I didn’t receive any text message or email alerting me of the situation. 

[My bank] charged a service fee and overdrafted my account twice. I’ve tried calling, chat (waited 20 min)… I thought that I was going to get that service fee waived because I had the requirements within the dates of the same billing cycle. 

I knew that I had some significant charges that were going to hit my account, so I transferred $3,000 from my savings account to my checking account… However, the bank still hit me with an overdraft fee… Even though [the representative] stated that the $3,000 was transferred to my account, it was not credited to my account [in time]. [The bank} always holds the funds for a day before crediting them to my account, which seems unethical and illegal.

Understanding the Urgency in Our Customers’ Complaints

Next, we explored the PositivityTech platform’s proprietary Severity Score, an algorithm designed to shed light on the business urgency of a customer complaint and a leading indicator of future adverse actions. We found that customer frustrations related to overdraft fees:

  • Are 24% worse than that of the average complaint.
  • Are the worst when a customer is closing on a mortgage.
  • Have the highest volume when customers’ funds are low.

Challenging Banks’ Assumptions

While many may assume that customers who overdraft are high risk, their narratives and reasons for overdraft show that they are actually a mixture of high- and low-risk customers. By utilizing the PositivityTech platform, we found that customers who share complaints about overdraft fees are:

  • Almost 20% less likely to close their accounts due to delinquency.
  • Over 40% less likely to fall into debt collection as compared to all complaints.
  • 5% more likely to close their accounts.

Responding to all overdraft customers in the same way will drive non-delinquent and revenue-generating customers to look for alternative resolutions.

Responding in a Multifaceted Way

Interestingly, financial institutions responded to many customers who complained about overdraft fees by providing monetary relief, acknowledging the challenges they face in the execution of regulations.

  • 45% of overdraft fee-related complaints result in monetary relief to the customer.
  • 9% of all CFPB customer complaints overall result in monetary relief to the customer.

Yet, providing compensation to address these issues is not a unilateral strategy that will improve customer satisfaction. Additionally, without improved targeting, monetary relief can be costly and ineffective. With customer complaints about overdraft fees increasing over time, anticipating and avoiding overdraft complaints is critical.

During the last 12 months:

  • The average monthly volume of customer complaints about overdraft fees has increased by 300%.
  • The average monthly volume of overdraft fee complaints resolved with monetary relief has increased by almost 3x.

With the PositivityTech platform, we have been able to understand customers’ behaviors by listening to their voices. Deeply understanding what our customers are saying drives predictive capabilities, which benefit all business functions; preventive actions that can address customer satisfaction; and regulatory and financial opportunities.

My team and I are ready to meet with you to share more of our findings about the hidden value in customer complaints.

The PositivityTech platform integrates with existing systems so that you can easily bring our platform to your organization. Learn more about it here.

Behind the Scenes of the PositivityTech® Intelligent Platform with Marcia Tal

Throughout my career, I’ve felt privileged to help multiple lines of business profit from the hidden value in their data. While companies approach many types of data as strategic assets, they consistently overlook customer complaint data. Together with my team, I am leveraging my deep experience with customer listening and shedding light on the hidden value of customer complaints.

This week, Tal Solutions announced the launch of the PositivityTech intelligent platform, a new platform that uncovers and enables the strategic growth opportunities hidden in customer complaints. In this interview, I share the pain point that the PositivityTech platform solves and how financial institutions can approach their customer data in strategic ways, particularly to create new revenue.

What problem does the PositivityTech platform solve?

Today, many businesses approach their customer complaints in a very transactional manner. They focus on satisfying customers’ immediate needs and meeting the requirements set by regulatory bodies. But most companies do not approach complaints as strategic assets. As a result, they miss systemic patterns that manifest in complaints. They miss issues that lead to negative headlines or regulatory risks. They miss opportunities to improve and strengthen their businesses, especially as they seek much-needed revenue growth.

We believe that customer complaints can be a critical part of a business’s success, and that negative input can have a positive impact. With PositivityTech’s predictive platform, which combines human insights with advanced technology, companies can foresee future complaints and their causes, quickly and proactively address customer feedback, protect their business, and improve performance.

How has your background led you to this new venture?

I have always been passionate about voice of customer data. There is a wealth of information that can be unpacked from customers’ feedback, word choice, and tone of voice. To really know how its business is doing, a company needs to get as close as possible to its customers and become open to hearing – and understanding – its customers’ complaints.

My background is in consumer banking, and I spent my career immersed in the intersection of customer data and advanced analytic disciplines. As Citigroup’s former EVP of Decision Management, I built and ran a global function bringing advanced analytic capabilities and processes to 30 markets. Before that, I implemented customer segmentations, product offerings, marketing campaigns, action-oriented analyses, and risk management policies and tools, all supported by operational innovations. I also audited businesses, met with regulators on a regular basis, and saw the underlying issues that franchises face. Over the course of my career, I have seen the challenges that companies can experience when they are not listening to their customers, and have worked diligently to advance these capabilities.

Now that companies have better access to very large and unstructured data sets of their own customers’ voices, they have the opportunity to hone in on customer complaint data in new ways. With advanced technology to reveal unexpected opportunities, companies can take actions to proactively strengthen their businesses and keep them ahead of the competition. I look forward to helping companies use their data to reframe their customer complaints as strategic and predictive insights, which can continually reveal opportunities for action and growth.

How can your approach to customer complaints proactively strengthen your business?

Strengthening your business often entails preparing for what’s ahead and understanding industry and market trends. When a company can identify and understand the specific problems described in its customer complaints as compared to its competitors’, it can predict future risks and reveal unexpected opportunities that keep it ahead of its competition. Complaints are everyone’s challenge, and strategic growth is everyone’s opportunity.

What can financial institutions do to make better use of their customer data?

Start approaching complaints as strategic intelligence, instead of individual issues that need to be resolved. Consider where complaints may highlight risks and how their language can be used to predict future issues, too.

Identify the severity of complaints, based on a customer’s word choice, tone of voice, or duplicate complaints. Flagging higher-risk customers will help you prioritize where action will matter the most. Understand the environmental risks that come from unresolved complaints – including public relations risks, lawsuits, and enforcement actions. Know that when complaints aren’t resolved, customers do not stop complaining. They may continue to complain to your institution – or they may approach other sources that are beyond your control.

How do you interact with your customer complaints today? I’d love to hear your techniques and help you unpack those complaints in valuable new ways that increase your bottom line. Please feel free to get in touch.

How Complaints Can Drive Business

As I speak with financial services executives throughout the industry, I listen to their challenges and explore their hidden opportunities for growth. While most are committed to listening more closely to their customers, they continue to share a similar approach to how they manage their customer complaints. Financial institutions work hard to resolve their customers’ complaints within a prescribed amount of time, based on either business or regulatory requirements. However, they rarely view complaints systemically or holistically as assets.

I believe that financial institutions are missing out on a massive business opportunity. Complaints are a hidden source of value. When seen as a strategic asset, complaints can become a critical part of a business’ success as any complaint can be unpacked for value. Intimate access to complaint data can proactively identify issues before they create a headline or regulatory risks, and even predict and prevent future problems. Prevention is a direct outcome of using your customer complaint data to surface business opportunities for growth.

How do I know this? Over the past 12 months, my team has developed and applied an integrated toolset of advanced technologies, analytic methods, and human intelligence to study Consumer Financial Protection Bureau (CFPB) data, treating it as such an asset. We took a deeper look at issues concerning the entire financial sector. One such issue is data breaches, and specifically the Equifax breach. Among our findings, we see that:

  1. Signs of the Equifax breach were evident at least 6 months before the media covered it.
  2. Once the media brought attention to the breach, consumers began to adopt and integrate the media’s language into their direct dialogue with multiple institutions.
  3. Consumers submitted duplicate complaints, providing deeper insights into the severity of issues and mistrust in our institutions, and impacting businesses in a widespread manner.
  4. There is an ongoing halo effect from this data breach impacting all financial institutions, even 12 months after the Equifax breach.
  5. Consequences vary by institution and can be predicted far enough in advance to reduce their severity.
  6. By combining proprietary financial institution data with publicly-sourced data, specific actions can be customized and implemented.

I found it surprising, then, that a recent article in American Banker challenged the validity of the CFPB’s data, claiming that it presents an inaccurate number of complaints because it frames inquiries as complaints, too. The article’s author wrote:

“When the CFPB fails to contextualize and present fair, accurate data that appropriately frames the number of complaints compared with the volume of contacts, or to separate mere inquiries and complaints about other industries, inaccuracies multiply and the debt collection industry ends up facing unfair reputational harm.” 

My team’s analysis has revealed that just the opposite is true. The CFPB is a valid source of data that needs to be taken seriously. When people turn to the CFPB with a complaint or an inquiry, they have an issue that hasn’t yet been resolved. Your customer’s voice is your most valuable asset and this data holds hidden opportunities.

All data sources are messy. That does not negate their potential business value. Cleaning and structuring the data are always necessary first steps to analyzing what your customers are telling you, extracting insights, and turning those insights into predictive indicators, broad-based strategies, and drivers for improved performance. Defining the contextual framework for the application of the CFPB data and building statistical rigor and robust predictive tools through its use is key to unlocking its value.

At Tal Solutions, we believe that negative input can have a positive impact. We’re focused on turning customer complaints into a source of business value. I’d be happy to share more about what we are learning from our conversations with executives and customers, how we’re finding value in complaints, and how our findings can directly benefit your work. Please feel free to reach out.

What Matters: 8 Enlightening Lessons about Data and Entrepreneurship from Marcia Tal

I have worked in large corporations, and I am growing my own company. I have learned that both environments require a strong vision and a solid business model for optimal execution.

To make an impact, tenacity and passion are necessary, as are effective data analysis, creativity, and experience.

These attributes served me well last year. In 2018, I discovered why an established corporation may seek expertise from a small company. I learned that while the terms, “machine learning” and “artificial intelligence” may fill your newsfeed, they may not always be the best solution for your business. I found new and innovative ways to effectively pinpoint negative feedback. I understood why companies may choose to share their data.

In 2018, I grasped more about what truly matters to my clients and to me — in data, in business, and in entrepreneurship.

Artificial Intelligence (AI) and People: They’re Complementary

“The real problem is not whether machines think but whether [people] do.” – B.F. Skinner

I embrace human-centered design.

In this Framework issue, we explore two very different articles that ponder the relationship between people and AI, which is complementary. The first one: “Why Algorithms Will Never Be Better than Humans,” by Jonas Altman — reinforces the importance of “mavens.” The second — “Smarter together: Why artificial intelligence needs human-centered design,” by Jim Guszcza — offers an in-depth analysis of the evolving relationship between people and AI.

Business leaders who embrace human-centered design focus on the needs of the people they serve, what problems or desires this group has, and then use technologies to design solutions which address these. Here are some thought-provoking ideas and insights into how to leverage this philosophy in your organization.