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A new report predicts banks could lose up to $20.3 billion in fees–and customer good will–by relying too heavily on checking relationships as a tool to acquire underbanked consumers. At least 14% of U.S. checking-account customers would pay less in fees if they switch to a prepaid debit card, according to a report Boston-based market-research company Aite Group LLC released today. Though "non-sufficient funds" fees and other fees associated with checking accounts generally are much less than those associated with prepaid debit cards, some consumers will pay less by switching to a prepaid card, the report notes. "The median prepaid debit cardholder pays 3.5% of his or her deposit inflows in fees, compared with 0.4% for the median checking-account holder," according to the report. But 14% of the checking-account holders surveyed paid more than 4% of their deposit inflows in fees for overdrafts or other problems with their checking accounts. Aite based the report on three sets of data: bank statements from 1,915 checking-account holders between November 2007 and October 2008, compiled by Lightspeed Online Research, Inc.; account data from 8,140 prepaid debit card accountholders over the same 12-month period, compiled by an undisclosed major prepaid card provider; and a November 2008 FDIC analysis of bank-overdraft practices. Banks could recoup some of these potential losses by developing more cobranded prepaid products with existing providers, says Gwenn Bézard, Aite research director and the report's author. "If consumers become more comfortable with prepaid debit cards and start loading more money on their cards, banks will find themselves losing more customers," he says. "So it's better for banks to start planning now what's going to be their alternate game plan."

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