Global intelligence firm Curinos released a study this week that examined the impact of bank-led innovations on the rapidly evolving overdraft marketplace.
The study highlighted the growing number of banks that have either already implemented or pledged overdraft reforms since a study it did last year on the state of the overdraft market in the United States.
Among the key findings, the report said that as of August 2022, at least 29 financial institutions with more than $10 billion in assets have announced significant reforms to their overdraft policies. Further, based on the voluntary changes that have been announced as of Aug. 25, 2022, overdraft fees are expected to fall by 68 percent between 2008 and the end of 2023. These changes are anticipated to result in $167 in annual savings per U.S. adult by the end of 2023.
In addition, Curinos projects that institutions with pledged and adopted reforms will reduce overdraft fees by 50 percent from 2019 to 2023. If these trends continue, consumers could save more than $28 billion in the five years between 2021 to 2025. The report also said that overdraft revenue comprises less than 2 percent of annual industry revenue and less than 4 percent of industry net income.
Lindsey Johnson, the president and CEO of the Consumer Bankers Association (CBA), said the impact of these changes is significant.
“Over the past year, America’s leading banks have introduced new overdraft innovations to provide consumers even greater choice and flexibility to make informed financial decisions. As this Curinos data concludes, the impact of these changes are significant and wide-reaching, with overdraft fees expected to fall by nearly 70% by the end of 2023. Policymakers should be focused on encouraging more of this innovation, which has occurred without regulatory or legislative innovation and is poised to yield meaningful savings for years to come,” Johnson said,
CBA has long advocated for products that provide a safety net for customers, like overdraft. Johnson recently wrote an op-ed in American Banker, urging policymakers to recognize the impact of bank-led overdraft innovations designed to expand choice, strengthen transparency, and lower costs. Also, CBA sent a letter to Congress reiterating its opposition to H.R. 4277, legislation that would restrict access to overdraft products.