Velocity Solutions Inc., a provider of revenue enhancement programs for banks, recently announced a program that allows community banks and credit unions to continue offering free checking to their account holders by generating a new revenue stream – at no cost to the financial institution.

Because numerous regulatory changes enacted in the past couple of years have resulted in reduced revenues to banks and credit unions from overdraft and some other fees, Velocity – which maintains an operations center in Wilmington – has explored ways of making up that income, the news release stated.

The new revenue source is the My Rewards Premium Debit Card, which Velocity officials describe as an upgrade to an account holder’s basic debit card. Cardholders enjoy benefits such as emergency roadside assistance, medical evacuation, prescription savings, extended warranty, local discounts and the ability to earn bonus cash back or points that can be redeemed for numerous rewards, the release stated.

Cost is $9.95 per month for a Gold Debit Card or $14.95 per month for a Platinum Debit Card.
Velocity officials say that the two cards “offer the type of rich benefits and services normally associated with elite credit cards.” Velocity provides marketing support and the underlying products and services, and gives a “very significant” share of the revenue to the participating financial institution.

Velocity officials stated that their program allows financial institutions to generate new, non-interest income with the potential to grow to the amount they earn from overdraft
and interchange fees. The new revenue stream will enable institutions to keep no-fee checking accounts as an offering, which Velocity’s research has shown is important in marketing to prospective account holders, officials said.

“Consumers have demonstrated that they don’t want to be charged for just having a checking account,” Mike Triggiano, Velocity Solutions’ executive vice president of product management, said in the release.

“But we also know that many are willing to pay a fee for benefits and services that provide value and convenience.”

Velocity rolled out the program in late 2013 to seven pilot institutions. During the pilot phase, the program generated hundreds of thousands of dollars in net income for the participating institutions, with just a small percentage of account holders choosing the card.

“The pilot stage of the My Rewards Premium Card program has been very positive and promising, and we estimate that an institution with 50,000 checking accounts can generate a new revenue stream of $1 million to $2 million annually,” Triggiano said in the release.