NEW YORK, December 1, 2021 / PRNewswire / – Curinos, a global data intelligence company serving global financial institutions for lending, deposit and digital banking solutions, today released its study “Competition Drives Overdraft Disruption.” The study found that the current wave of changes to bank overdraft programs is driven more by competition than regulation. In addition, the study shows that the market rewards organizations that revise their existing discovery programs or develop alternative products, and institutions that are slow to act will lose customers to more aggressive competitors. Therefore, financial institutions must continue to innovate and provide more low-cost liquidity options, with or without regulatory changes.
“Overdrafts have been a big topic among stakeholders for years, but renewed attention from policymakers amid the economic impact of the COVID-19 pandemic has put more light on Americans’ financial needs,” said Hank Israel, director of innovation and new markets at Curinos. “These pressures, combined with the introduction of new products and discovery policies, have presented the need for a new round of research on this important topic and concrete recommendations for industry.”
Backed by proprietary research from Curinos, the report’s methodology encompasses both consumers on the demand side and financial institutions on the supply side. On the demand side, Curinos took advantage of an annual online consumer study verifying the purchasing behavior of approximately 12,000 respondents, and an online consumer study targeting overdraft behaviors. On the supply side, Curinos used a survey of disclosures and offers from 38 financial institution websites, matching a 2015 Pew study where possible, as well as an anonymized survey of the data. behavioral results of 14 financial institutions with $ 2 billion to end $ 100 billion in total assets, representing $ 637 billion of total US consumer deposits.
The results indicate that intense competition in financial services is driving recent changes in overdraft policies and programs and that:
- Overdraft fees are down significantly: Overdraft receipts in the United States fell about 57% from 40 billion dollars in 2008 at $ 17 billion in 2019.
- Fewer people use the overdraft: The percentage of regular overdraft users (those who complete 10 or more transactions per year) decreased from 40% to 4.9% of the population between 2010 and 2020.
- Challengers who adopt pro-consumer policies gain market share: New entrants, including fintechs and challenger banks, have created solutions to better manage or reduce the cost of overdraft. These entities have seen a 40% improvement in account acquisitions since 2017. Financial institutions that have not embraced overdraft innovation have seen an almost 30% reduction in consumer acquisitions.
- Consumers understand the overdraft: Consumers, especially discoverer users, continue to demonstrate a deep understanding of discoveries and available alternatives. Over 60% of overdrafts come from consumers who intend to use the service. Over 80% of overdraft transactions come from consumers who have opted for debit card overdraft programs with the clear intention of using it to cover their payments. And two-thirds of consumers say that while overdrafts can be expensive, they don’t want their access to the service cut.
- Consumers want more cash choices in the short term. Consumers are looking for practical and relevant alternatives to overdraft. The emergence of alternatives on the market pushes to consider new purchases of checks.
- Larger transactions now trigger an overdraft. The proliferation of overdraft grace balances and changes in order validation practices have reduced the number of small overdraft purchases. As a result, the average size of purchases that trigger overdraft fees has almost quadrupled from $ 50 at almost $200.
The study was commissioned by the Consumer Bankers Association (CBA) to fill a research gap to better understand consumer sentiment, and the CBA funded the market study. Curinos independently designed, analyzed and documented the research results.
To access the full study, please visit: https://curinos.com/insights/competition-drives-overdraft-disruption.
Curinos is the leading provider of data, technology and information that empowers financial institutions to make better, more profitable, data-driven decisions. Born from the combination of two familiar industry powers, Novantas and Informa’s FBX business, Curinos brings to the market a new level of expertise in the field of deposits, loans and experience solutions and technologies. digital. With access to comprehensive data sets and analytics, smart technologies and connected behavioral insights, Curinos is the partner of choice to help you attract, retain and develop more profitable customer relationships. For more information, please visit www.curinos.com.
CONTACT WITH THE MEDIA:
Zach Allegretti, JConnelly