The rise of fintechs over the last decade-plus has changed the way many traditional financial institutions do business in order to keep up. When they began offering high-yield savings accounts, banks had to start doing the same in order to stem the tide of deposits flowing outbound. The explosion in popularity of robo-advisers caused traditional brokerage firms to begin offering digital, no-fee accounts.
Could checking and savings account fees be next on the chopping block? Banks have long relied on these — such as overdraft fees or minimum balance fees — as a significant source of revenue. But again, they are now competing with many upstart fintechs that don’t charge their customers such fees (or at least they charge fewer of them.) Discover Bank, the online-only banking arm of Discover, is dropping fees from its online checking and savings accounts for things like insufficient funds and excessive withdrawals. Discover says it is doing this in order to better compete with digital-only start-ups like Chime, Sofi Money and Simple.
Fees have long been atop the lengthy complaint list consumers have when it comes to banks. And they generally hit lower-income consumers the hardest; it’s typically those with low bank balances that get hit with overdraft and insufficient funds fees. Discover Bank, though a subsidiary of a traditional financial institution, isn’t really a “traditional” bank itself — it’s only a couple decades old and has no branches. But we will venture to guess more banks will go down this same route against increasing competition from digital and traditional competitors alike.