Artikel Jurnal

Analyzing Bank Overdraft Fees with Big Data. E-Journal

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In 2012, consumers paid $32 billion in overdraft fees, representing the single largest source of revenue for banks from demand deposit accounts during this period. Owing to consumer attrition caused by overdraft fees and potential government regulations to reform these fees, financial institutions have become motivated to investigate their overdraft fee structures. Banks need to balance the revenue generated from overdraft fees with consumer dissatisfaction and potential churn caused by these fees. However, no empirical research has been conducted to explain consumer responses to overdraft fees or to evaluate alternative pricing strategies associated with these fees. In this research, we propose a dynamic structural model with consumer monitoring costs and dissatisfaction associated with overdraft fees. We apply the model to an enterprise-level data set of more than 500,000 accounts with a history of 450 days, providing a total of 200 million transactions. We find that consumers heavily discount the future and potentially overdraw because of impulsive spending. However, we also find that high monitoring costs hinder consumers' effort to track their balance accurately; consequently, consumers may overdraw because of rational inattention. The large data set is necessary because of the infrequent nature of overdrafts; however, it also engenders computational challenges, which we address by using parallel computing techniques. Our policy simulations show that alternative pricing strategies may increase bank revenue and improve consumer welfare. Fixed bill schedules and overdraft waiver programs may also enhance social welfare. This paper explains consumer responses to overdraft fees and evaluates alternative pricing strategies associated with these fees.

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Ketersediaan

Informasi Detail

Judul Seri

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No. Panggil

332.1 LIU a

Penerbit

: Institute for Operations Research and the Management Sciences., 2018

Deskripsi Fisik

855-882 hlm ; 28 lembar

Bahasa

English

ISBN/ISSN

0732-2399

Klasifikasi

332.1

Tipe Isi

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Tipe Media

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Tipe Pembawa

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Edisi

Vol. 37, Issue 6

Subjek

Perbankan

Info Detail Spesifik

Document Type: Report

Pernyataan Tanggungjawab

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Versi lain/terkait

Lampiran Berkas

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