How Diane Morais abolished overdraft fees at Ally Bank

It took several months to delete overdraft fees from all systems at Ally Bank, but the effort was well worth it, according to Diane Morais, president of consumer and commercial Banking, who thought of and led this effort. "The move on being the first major bank to fully eliminate the fees has played very well in how people perceive Ally and why they want to continue to do business with us," she says.

Transcription:

Penny Crosman (00:09):
Welcome to Leaders. I'm Penny Crosman, executive editor of Technology at American Banker, and I'm here today with Diane Morais, President of Consumer and Commercial Banking at Ally Bank. Welcome Diane.

(00:21)
Diane Morais: Thanks, Penny. Great to be here.

(00:23)
Penny Crosman: One of the ways Diane has shown leadership in the past year is she led her bank to be one of the first, if not the first, to eliminate overdraft fees entirely. And it was interesting because when Ally made this announcement, it was a pretty big deal. We wrote about it, everybody wrote about it, and then shortly afterwards, several other large banks announced that they were eliminating overdraft fees. And since then we've seen kind of a continual drumbeat of other banks doing the same thing. So it really has kind of had this domino effect. Maybe that's not the right analogy, but it's had an effect across the industry. So Diane, how did this first come up and how did you pursue this idea across your organization?

(01:15)
Diane Morais: So, great question. And I would say that at Ally we have had a long standing focus on doing it right for our customers, our communities, our stakeholders. Coming out of the pandemic, particularly actually going into the pandemic, we took a lot of industry leading actions to really give consumers relief because none of us knew what was really going to be the ultimate impact on the consumer. So it involved waiving overdraft fees, payment deferrals on our auto loans and mortgages, and we learned a tremendous amount during the pandemic and heard very strong positive feedback from our customers and even customers or potential customers I should say who saw Ally taking these strong consumer friendly actions. And after the pandemic, I think it was probably spring of 21, we were looking at the data and doing more consumer research, and we said, we can't solve every problem in the world.

(02:16)
And for Ally, we were never built on having a high amount of fees for customers. And we said, we're just going to eliminate them entirely and quite frankly, take a strong stance in favor of the consumer. So it's been really rewarding to see the industry also follow suit in many ways. And I think again now as we sit here on the brink of maybe a recession or a worsening economy and a lot of stress on some consumers, the people who can least afford these fees are the ones disadvantaged the most.

(02:52)
Penny Crosman: That's so true. Have you gotten a lot of feedback from customers or have you seen it make a difference in people's lives?

(02:58)
Diane Morais: We have. A tremendous amount of positive feedback has come in. I've saved many of the emails and letters because they really motivate me and the entire organization because we see what a difference we can make in someone's lives.

(03:13)
And so we still hear it when consumers come to Ally. And I think there's some degree of, is this real? Are they really going to be this customer friendly institution? But the move on being one of the first, or we say the first major bank to fully eliminate the fees has played very well in how people perceive Ally and why they want to continue to do business with us.

(03:42)
Penny Crosman: How tough was this to do internally? Did everyone agree with you right away or did you have to do a lot of convincing?

(03:50)
Diane Morais: No, this is one of the reasons why I am so thankful to work at Ally and have an amazing CEO in Jeff Brown, an amazing board that's very supportive. We've always built this company around customer first. From the very first day when we were designing the brand, it was how do we take every experience and design it around the customer?

(04:14)
I've been at Ally 14 years and that still persists. It's even stronger now. And so I remember the day very clearly, I'd been talking with the head of deposits and we said, we just need to go here and fully eliminate that. And I went to JB, the CEO and it was a very easy conversation and he was very supportive, as was our board.

(04:39)
Penny Crosman: That's great. And how heavy a lift was it in terms of technology, executing that eliminated fee across all your systems?

(04:49)
Diane Morais: So it was not a terribly heavy lift, and I tell you, we started because we wanted to do it quickly. And so we did sort of a phase one, which was we were just doing immediate reimbursements, so we hadn't fully taken it out of every underlying system, that took a few more months, but we did get that work prioritized.

(05:14)
It wasn't complex, but we just needed to make sure that it was done and tested and really was going to be robust when we put it fully in production. So again, we probably have a little bit of a, luxury is not the right word, that we don't have hundreds of years of legacy systems that are stitched together, but there's complexity in our business as well. So it took a few months.

(05:43)
Penny Crosman: What if someone needs to buy something, they have an emergency, but they don't have the money in their account. Is there something special you can do at that moment?

(05:52)
Diane Morais: We do and we launched it earlier this year. We call it cover draft. And essentially this is another one that we've kind of done in phases. Another program we've delivered in phases where we started with a cushion and that cushion was drawn at a certain amount, and now we've increased the cushion for consumers who actually have direct deposit with Ally, so they have an even higher cushion.

(06:21)
And the rationale behind that is pretty obvious. If you have direct deposit, the likelihood of the money coming in, you might be off a day or two, but the cure rate's quite high. And we hear from consumers, they like having that peace of mind because some people are not always watching down to the penny in their account and they may unfortunately have forgotten about a transaction or a check cleared when they weren't expecting it. And so that buffer has really been beneficial for consumers. So it's like a little short term loan in a way. You can think about it that way. Yeah, I mean, there's not something we charge interest against obviously, but the ability to cure it pretty quickly happens the dominant percentage of the time.

(07:14)
Penny Crosman: The elimination of overdrafts obviously makes a dent in non-interest income. Have you had to make that up in some other way?

(07:25)
Diane Morais: So for Ally, the amount of fee give up was a very small amount of the company's overall revenue. And so quite frankly, the way we looked at it was a small amount, not even a 0.1% of our total annual revenue. It was a very easy trade in terms of obviously the brand impact and the positive reputation impact that we've had on the company. So we've been in growth mode and we do know and have heard from many people that they've come to Ally because of that policy.

(08:03)
Penny Crosman: There's definitely a reputation benefit of that, I'm sure. Have you actually seen growth in deposits because of that?

(08:12)
Diane Morais: I think it's hard to discern exactly which amount of the deposit growth has come purely because of the elimination of the fees, But we do a tremendous amount of voice of customer analysis.

(08:26)
It comes up a lot as another reason that people come to Ally and stay with Ally. So we have record leading retention levels on a good day, but they've stayed really high even post this announcement.

(08:39)
Penny: Sure. Have you thought about any other fees? Are you rethinking other things and possibly eliminating other types of fees?

(08:48)
Diane Morais: We don't have a lot of fees. We have some fees. We did also eliminate a mortgage origination fee that was actually around the same time. But beyond that, we look every six months, every 12 months around what are we charging consumers? Is it fair, is it transparent? And quite frankly, is it worth the complexity to have in the system? There isn't really anything right now that we think is hitting the radar but we continuously evaluate our value proposition. And again, we are a very low fee institution to start.

(09:28)
So there's really not a lot left.

(09:32)
Penny Crosman: So one thing that other people might learn from you is how to take an idea and bring it to fruition throughout a large, matrixed organization. Do you have any advice on that, bringing your ideas to life?

(09:48)
Diane Morais: So that is a daily event at Ally, and I know at institutions everywhere. For the advice part of this, I'd say the idea always has to start with what is the compelling reason why we should do something? Is there a business case, either qualitative or quantitative? When there's hard data to support it, that's better. But there are things that we do and we will make decisions based on either customer feedback or a complaint category. So we call it make the case for change and then iterate around is this the best way to go about executing it?

(10:31)
And we call that putting the customer in the room and then pushing and pulling around what's the best way forward once we lock in on the requirements and the decision. I mean, we are a pretty nimble organization, and so we don't have multi-layers of decision making. And then it's all about executing. And so bringing the right people to the table early and bringing them into the visioning part of that, I think, is huge. We learn this over and over when people who might be designing a digital experience or a part of our mobile app or a journey, if they know what we're really trying to accomplish, then the way to bring that to life in an Ally way, that is an end to end experience, is the way to get it done faster because people are asking questions along the way. We take friction out of the decision making process, and that's how we bring to market all that we do.

(11:32)
Penny Crosman: Is there any advice you would give to young women or young people just starting out in this industry today?

11:40)
Diane Morais: I have so much advice, but probably the best piece of advice I have, and I use this at Ally all the time, be intellectually curious and open to possibilities. And I look back on my career and the journey that I've had was a winding path, but each opportunity that I had, I learned new skills and then you propel yourself forward. If you only think about going straight up, you're goning to miss out on a lot of really enriching experience, and that's the best advice I always give our young people at Ally. And hopefully that will resonate with some of your viewers.

(12:22)
Penny Crosman: All right, awesome. Well, Diane Morais, thanks so much for joining us today.

(12:25)
Diane Morais: Thanks, Penny.