[American Banker] BankThink Banks' consumer-friendly moves validate challenger model

Originally posted on American Banker

Just as fintech is taking on record-setting equity capital, nearly a dozen incumbent banks have signaled that they are “rethinking” their business practices as they relate to traditional checking accounts. A few of them are eliminating their often-punitive overdraft charges; others are copying a page from the fintech playbook and making funds from direct deposits available on the same day.

Pressure on retail banking incumbents to abandon the fees and practices that often penalize cash-strapped Americans has been heating up from Congress and federal regulators. As an investor who bet early on digital-first challenger banks, I’m pleased to see incumbents finally trying to catch up with the more consumer-friendly models pioneered by fintechs.

The first mover among incumbents has been Ally Financial, which eliminated overdraft fees earlier this summer. No-fee, no-minimum-balance checking is a core feature of the most successful fintech challengers. More incumbents are finally mimicking fintechs’ most popular offerings, like those that extend short-term credit at no fee when debit charges are overdrawn.

While not ready to abandon overdrafts, Bank of America and PNC have rolled out copies of fintech services to help customers avoid them, with grace periods, alerts, spending limits or credit when balances near zero.

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