A UK financial regulator published figures that show customers who sign up for either text alerts or mobile banking apps reduce their amount of unarranged overdraft charges by between five per cent and eight per cent.
And those who enrol for both text alerts and apps benefit from an additional effect, resulting in a total charge reduction of 24 per cent.
The Financial Conduct Authority (FCA) analysed data supplied by two large banks. One of the two supplied “granular data” for 500,000 customers, it said.
The research showed that mobile services encourage customers to be more engaged with their finances. In contrast, sending an annual account summary to customers has “no effect” in terms of incurring overdraft charges, altering balance levels or switching to other current account providers.
Text alerts and banking apps also reduce current account balances by 17 per cent to 24 per cent, which is actually good because it means customers are reducing the cost of holding funds in accounts with low interest rates.
The research also found that middle-aged consumers with higher incomes typically pay the most overdraft charges, and are less likely to switch. They gain most from text alerts and mobile device apps.
“This is not just a low-income policy challenge, although the personal impact here on poorer consumers will clearly be felt more keenly. Overdraft charges are actually affecting swathes of middle-Britain,” FCA chief executive Martin Wheatley (pictured) said in a speech this week, reported by Reuters.
The authority said it wanted to dig into the area ahead of a potential investigation by anti-trust regulator the Competition and Markets Authority into personal current bank accounts in the UK.