Capital One, the 6th-largest retail bank in the world, announced that it would eliminate all overdraft fees starting early next year.
On Wednesday, December 1st, CEO Rich Fairbank sent a memo to Capital One employees stating that the company will eliminate overdraft and non-sufficient funds fees for all consumer bank customers.
With typical overdraft fees ranging from $25 to $35 per instance, the decision will cost Capital One an estimated $150M a year.
The move, which smaller institutions have made, is considered to be a first by a major U.S. retail bank.
Fairbank states that eliminating fees is “another step in our effort to bring ingenuity, simplicity and humanity to banking.”
Losing an additional $150M a year is not an easy pill to swallow.
Banks pulled in around $14B in 2019 from overdraft fees, so it’s definitely a contentious topic for an industry rife with a greedy image.
Fairbank’s decision to ax a predictable and recurring revenue stream shows us that he’s serious in making Capital One a bank that serves its customers and not one that profits off of punishment.
Sure, it’s a high price to pay, but it opens up an opportunity for new customers and markets through the goodwill acquired by an unpopular business decision.
Something that not many competitors can say they have.
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