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Sending out an SMS: automatic enrollment experiments for overdraft alerts

Author

Listed:
  • Grubb, Michael D.
  • Kelly, Darragh
  • Nieboer, Jeroen
  • Osborne, Matthew
  • Shaw, Jonathan

Abstract

At-scale field experiments at major U.K. banks show that automatic enrollment into “just-in-time” text alerts reduces unarranged overdraft and unpaid item charges 17% to 19% and arranged overdraft charges 4% to 8%, implying annual market-wide savings of £170 million to £240 million. Incremental benefits from “early-warning” alerts are statistically insignificant, although economically significant effects are not ruled out. Prior to the experiments, over half of overdrafts could have been avoided by using lower-cost liquidity available in savings and credit card accounts. Alerts help consumers achieve less than half of these potential savings.

Suggested Citation

  • Grubb, Michael D. & Kelly, Darragh & Nieboer, Jeroen & Osborne, Matthew & Shaw, Jonathan, 2024. "Sending out an SMS: automatic enrollment experiments for overdraft alerts," LSE Research Online Documents on Economics 126884, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:126884
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    File URL: http://eprints.lse.ac.uk/126884/
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    References listed on IDEAS

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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