Financial institutions have historically relied on interest income, generated from loans and investments, as their main source of revenue. However, evolving economic conditions and customer expectations have heightened the importance of maximizing non-interest income. By diversifying revenue streams, banks and credit unions can ensure financial sustainability, fund innovation, and stay competitive. With about 83% of all bill payment methods now electronic, offering robust digital payment solutions presents a significant opportunity to drive fee-based income while also enhancing the customer experience.
What is Non-Interest Income?
Non-interest income is the revenue financial institutions generate from activities outside of interest on loans or investments. This includes fees, service charges, and income from financial products.
Why Do Financial Institutions Need to Generate Non-Interest Income?
Traditionally, non-interest income provides stability in fluctuating interest rate environments as interest income tends to become unpredictable. It also empowers financial institutions to invest in innovation and maintain a competitive edge.
Recent industry statistics reveal that non-interest income now constitutes a larger percentage of overall earnings for many financial institutions. Over the past decade, non-interest income has made up about 35% of total income for U.S. banks. In addition, 2024 reports reveal that the non-interest income of FDIC-insured commercial banks in the U.S. totaled about $295 billion. In the second quarter of 2024 alone, non-interest income increased by 1.5% from the previous quarter, totaling a net operating revenue of $250.7 billion for these institutions. This growing share of overall earnings shows the elevated role non-interest income now plays in sustaining profitability.
How to Increase Non-interest Income for Your Financial Institution
Fees and charges are a straightforward and reliable way for financial institutions to generate non-interest income. They come directly from customer transactions or services, offering steady income streams with minimal operational adjustments. By ensuring policies are transparent and fair, financial institutions can retain customer trust while boosting profitability.
Some financial institutions even charge fees for certain payments products and services, including instant payments. For example, Chase outlines its business banking services and associated fees here. Similarly, Apple Federal Credit Union provides details on fees for funds transfers and other services on its Rates & Fees page. As a trusted partner of Apple FCU, Alacriti supports credit unions and banks in delivering innovative payment solutions that enhance member experiences while providing flexible pricing models.
Modern digital and payment services are crucial as customers seek faster, more efficient financial management. By leveraging technology, financial institutions are efficiently able to offer value-added services that generate revenue while reducing costs. For example, Alabama Credit Union’s skip-a-pay promotions, powered by Alacriti’s Orbipay EBPP, generated $81,000 in fee income, boosting revenue while providing members with a popular bill payment feature.
Financial products and advisory services allow institutions to deepen relationships with customers while diversifying revenue streams. By offering tailored solutions and leveraging expertise, banks and credit unions can position themselves as trusted partners in financial management.
Today, diversifying income streams is not just beneficial—it’s essential. Non-interest income provides stability, supports innovation, and enhances profitability. By leveraging a comprehensive list of revenue-generating strategies, from premium banking services to instant payments, financial institutions can ensure long-term success. Modern tools like Alacriti’s instant payment and loan payment solution empower banks and credit unions to meet evolving consumer demands while driving fee income.
To learn more about Alacriti’s Orbipay platform, click here.
Alacriti’s centralized payment platform, Orbipay Payments Hub, provides innovation opportunities and the ability to make smart routing decisions at the financial institution to meet their individual needs. Financial institutions can take full ownership of their payments and control their evolution with ACH, Wire, TCH’s RTP® network, Visa Direct, and the FedNow® Service, all on one cloud-based platform. To speak with an Alacriti payments expert, please contact us at (908) 791-2916 or info@alacriti.com
