Skip to content
CCG Insights

Research Snapshot

  • Research Snapshot

Overdraft Innovators Win Over Consumers

Overdraft Innovators Win Over Consumers

Overdraft Innovators Win Over Consumers

January 26, 2022

By: Kate Drew

Overdraft and Innovation

Late last year, we discussed the overdraft debate in the US and the trend toward eliminating fees, pushed forward by fintech competitors and potential regulation. Since then, Capital One announced that it will remove overdraft fees for all consumers, ceding $150 million in annual revenue in the process, and others have made similar moves. The question now is, as more banks wade into this pond, how can they turn this decision into a positive business move for their organizations? The answer, as it so often is, is innovation. Institutions vary widely in how they are going about making overdraft less of a burden on consumers, including introducing alternatives that allow for some flexibility and retained revenue. And these banking providers are being rewarded — according to a recent report by Curinos, banks with overdraft innovations saw an increase in purchase rate of 42% between 2017 and 2020, compared with a 27% drop for those with traditional programs.

This data suggests that there is not only merit but also value in innovating around overdraft. It doesn’t have to be as simple as removing fees or not. There are ways to create programs that work for consumers and the bank. For example, Huntington’s 24-Hour Grace feature allows customers to avoid overdraft fees by making a deposit by midnight the next business day that will bring the account into a positive balance. According to the report, these kinds of innovations are helping banks to make their value propositions more attractive, improving key metrics without doing away with overdraft entirely. Such offerings are also popular with neobanks — Chime, for example, offers an overdraft protection program, called SpotMe, which allows users to overdraw up to $200 on debit purchases without incurring a fee.

It’s one thing to talk about eliminating overdraft. It’s another to actually put it into practice in a way that makes sense. As with almost everything in banking and business, the most successful solutions are usually the most thoughtful. When it comes to an area like overdraft, many banking providers may be reluctant to join the party because of fears over lost revenue. But, as Curinos’ data illustrates, getting creative can actually drive favorable outcomes. Truthfully, while the debate may rage on, now that the horse is out of the stable, it’s probably not coming back. That means, over time, the industry is likely to move further and further away from traditional overdraft fees. So, reluctant institutions might as well embrace it and begin to develop a plan that is strategic. If done right, it could result in a competitive advantage.


Subscribe to CCG Insights.

You Might Like These, Too

P2P Payments Adoption On The Rise But Not Without Cost

P2P Payments Adoption On The Rise But Not Without Cost

Are We Done With Overdraft?

Are We Done With Overdraft?

Fintech Disruption Leads to Consolidation in the Wealth Management Space

Fintech Disruption Leads to Consolidation in the Wealth Management Space

Collaboration Accelerators

Collaboration Accelerators

Leaders in Bank Consulting

About CCG Catalyst
Latest Insights
CCG

PHOENIX • NEW YORK • LONDON • SINGAPORE

Phone: +1-480-744-2240  • Contact Us

© 2023 CCG CATALYST CONSULTING. Privacy Policy & Terms of Service.
Request a Call Back
Linkedin Twitter
Subscribe
to our Insights
Subscribe
We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept All”, you consent to the use of ALL the cookies. However, you may visit "Cookie Settings" to provide a controlled consent.
Cookie SettingsAccept All
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Non-necessary
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
SAVE & ACCEPT
BANK
FINTECH
FUSION
  • About
  • Services
  • Insights
  • Fintech
  • Research
  • Team
  • Contact
  • Press
  • Careers
  • Events
  • RFI / RFP
  • Terms
  • Privacy
Linkedin Twitter Search
Subscribe for Insights

CCG INSIGHTS FOR BANKS, FINTECHS, AND CREDIT UNIONS

The Fed, Real-Time Payments, Alexa and Apple P2P, Part of Payment Revolution
  • Weekly digest of what's new
  • New research snapshots
  • Exclusive access to banking and fintech research
  • Industry news
  • Invitations to webinars and webcasts