Time to Act: A Field Experiment on Overdraft Alerts

Abstract

Despite the growth of digital banking and the rapidly expanding offering of money management applications, a substantial proportion of banking customers still incur overdraft and unpaid item charges. To the extent that such charges are incurred due to inattention, our previous research shows that automatically enrolling consumers into just-in-time warning alerts can reduce charges. In this paper, we report the findings of a large-scale field experiment with two UK retail banks on automatic enrolment of consumers into just-in-time and early-warning overdraft and unpaid item alerts. In line with our earlier research, we find that that just-in-time alerts lead to statistically and economically significant reductions in charges. The evidence on the effectiveness on early warning alerts, by contrast, is mixed. A survey with a sub-sample of participants reveals that automatic enrolment into alerts is supported by consumers, even those who opted out of receiving alerts.