From profiting off overdrafts to preventing them: How FIs are evolving their revenue models

The Consumer Financial Protection Bureau, under the Biden Administration, finalized a rule in December last year that caps bank overdraft fees at $5 — significantly lower than the typical $35 charged by big banks and credit unions. 

Banks historically depended on overdraft fees as a key revenue source, but increasing scrutiny from regulators and consumer advocates has led to a shift in their strategy. Many FIs are turning to alternative solutions that not only ensure regulatory compliance but also strengthen customer loyalty, trust, and provide a competitive edge.

As FIs reassess their overdraft revenue strategies, companies like California-based DoubleCheck are stepping in to fill the gap for both FIs and their customers.

DoubleCheck, who?

DoubleCheck offers overdraft protection and transaction management solutions for banks and credit unions through integrations. These integrations connect with a bank’s or credit union’s existing core banking systems and transaction platforms.

These institutions, in turn, offer DoubleCheck’s services to their customers – consumers and business account holders – enabling them to review and adjust transactions that might otherwise be declined due to insufficient funds, helping customers avoid overdraft fees.

“DoubleCheck, built by bankers for banks and credit unions, notifies account holders in real-time if they have non-sufficient funds in their account and allows them to alter the financial institution’s decisions on what gets paid, using a range of payment methods,” says Ashwin Rangan, the fairly new CEO of DoubleCheck.

“DoubleCheck’s offerings help FIs not only prove that their offerings are on the ‘right side of the law,’ but more importantly, that in both letter and spirit, their services are adding value to their end-customers.”

DoubleCheck was founded nearly a decade ago. The first five years were focused on identifying the problem area, exploring potential solutions, and securing intellectual property. It wasn’t until 2019 that the company began fully developing and implementing viable products.

“With over 5 years of effort behind [us], DoubleCheck is past the crawl and tottering walk stages. It is beginning to hit its stride,” Rangan notes. “I feel excited to be given this opportunity to take it from a walk to, eventually, a steady-paced, long-stride marathon run.”

The new face leading the charge: Rangan took the helm at DoubleCheck last month, bringing extensive experience from his previous roles, including tech executive at Bank of America, former CIO of Walmart.com, and most recently, chief innovation and information officer (CIIO) at the Internet Corporation for Assigned Names and Numbers (ICANN).

At BofA and Walmart.com, Rangan led much larger teams compared to DoubleCheck. His experience scaling both teams and technology is something he’s eager to apply at DoubleCheck.

“No two companies are alike,” says Rangan. “I am sure that I will be making new mistakes here. However, I trust my maturity to guide me to quickly recognize these mistakes, humbly acknowledge and accept that I made mistakes, learn from them quickly, and move on to the next step quicker.”

DoubleCheck’s building blocks: DoubleCheck solutions are cloud-native, but under special circumstances, Rangan says the firm offers solutions on-premises.

These solutions integrate into every layer of a financial institution’s technology stack, connecting with its Core Banking Systems (CBS) and Digital Banking (DB) platforms.

Rangan likens it to an iceberg: 10% is visible, while 90% is submerged. 

From the customer’s perspective, DoubleCheck appears as simple additions to the FI’s online banking portal, such as single sign-on (SSO) options and new icons like Visible Status, Basic Actions, or Granular Control, depending on the FI’s configuration. These features are just the tip of the iceberg, Rangan explains.

The bulk of the integration work occurs behind the scenes of the customer experience, involving CBS providers like Jack Henry and Fiserv, and DB platform providers like Alkami and Q2.

“This is the bulk of the iceberg,” says Rangan. “We do this with our patented approaches and with certifications at the highest levels in cybersecurity.”

Rangan further explains that his firm has custom-crafted these integrations themselves, “with extreme care – because money matters!”

A case study approach: How does DoubleCheck function in real-world scenarios?

Very often, unpredictable expenses can result in a non-sufficient funds (NSF) situation in a consumer’s primary account used for bill payments.

“The origin story for every overdraft (OD) is an NSF condition,” says Rangan.

He explains how DoubleCheck operates through a real-life example for a consumer. 

Picture this: It’s February 2nd and your account balance this morning sits at $2,350. Bills are due and the next paycheck of $1,500 (after taxes) is expected on Friday, February 7th. 

Here’s a list of charges due soon:

This snapshot illustrates how the account’s closing balance fell below the required threshold probably due to an unexpected expense in late January. When this sort of situation arises, DoubleCheck Messenger’s Visible Status solution sends an immediate alert to the customer.

To prioritize bills before the FI processes them in the usual order, DoubleCheck Messenger’s Basic Actions solution helps the user prioritize rent payment, moving it up even though it’s due by February 7th.

But there’s still an outstanding shortfall of $775.

Tapping into funds from another account or utilizing available credit card limits could help resolve this challenge. With its Granular Control feature, DoubleCheck Messenger lets FI customers connect these external funding sources to ensure timely bill payments, reducing the risk of overdraft fees.

Challenges in offering these solutions and how DoubleCheck overcomes them

Rangan acknowledges that while DoubleCheck’s solutions offer convenience to end users, delivering them comes with behind-the-scenes challenges. 

Here’s why:

i) DoubleCheck operates in a B2B2C model, selling its solutions to banks, which then offer them as services to their customers. This means that DoubleCheck has to first make its offerings compelling and cost-effective for financial institutions before delivering value to end users.

ii) These solutions function as extensions of Core Banking Systems and Digital Banking platforms, and FIs often customize their systems, adding complexity to the implementation.

“Not least, like every technology implementation, our solutions are as much about change management as they are about implementing new technologies,” Rangan says.

He outlines the key strategies DoubleCheck is using to overcome these challenges:

1. On the technical side – Improving integration simplicity: DoubleCheck is streamlining integration by developing standardized templates, pre-and post-installation checklists, and a self-service admin interface that allows FIs to configure solutions more easily. The firm is also leveraging open APIs and standardized file formats to improve repeatability and ease of use.

2. On the customer service front – Investing in customer support efforts: DoubleCheck is deploying customer success teams — its own badged employees working alongside FI staff before, during, and after implementation — to ensure smoother adoption and ongoing support.

“Our customer success teams ensure that customers feel confident and comfortable with our solutions when we leave their premises,” Rangan notes.