Skip to main content

Michael Moebs - What CUs Can Learn From McDonald’s

 By Ray Birch

LAKE FOREST, Ill.—Three out of five American households overdraw at least once per year. About seven out of eight households go to McDonald’s each year.

Why are those statistics important? They share a unique perspective on a problem facing credit unions and banks, and share insights into the value consumers place on overdrafts, according to Moebs $ervices, which adds financial institutions could learn a great deal about effective OD pricing from how McDonald’s prices its burgers.

Screenshot 2024-12-17 124447

Moebs data show overdraft prices fell 28.9% from 2018 to 2024.

As of October 2024, the mean OD list price was $21.85, according to Moebs national market share surveys of 74.8% of retail checking accounts at banks, credit unions, thrifts and fintechs.

“So, during COVID, McDonald’s price and revenue rose slowly. Yet the OD price fell and OD revenue fell 50%,” said Michael Moebs, chair of private financial service research firm Moebs $ervices. “While it seems odd to compare a burger to an overdraft, it represents the dilemma financial institutions are in over fees for services rendered. Ultimately this is a question of value. During the worst pandemic in over a hundred years, McDonalds succeeded but financial institutions did not.”

McDonald’s Quarter Pounder with cheese price rose 33.4%. The Consumer Price Index rose 28.3%. Overdraft prices dropped 28.9%.

“McDonald’s maintained net income and stock value, while financial institutions lost value, led by the overdraft price drop,” Moebs said.

So, should FIs treat fees like McDonald’s treats its burger pricing?

“View burgers as an index, like the Consumer Price Index,” said Moebs.

What does McDonalds do to promote value?

“McDonald’s changes prices by individual market. OD price is basically one price fits all, with little variance,” explained Moebs. “The McDonald’s price reflects the cost of ingredients, people and buildings in a value package liked by the consumer. OD pricing reflects only risk and no value caused by penalty pricing now or during a pandemic.”

Walmart And McDonald's Could Control The Market 

Moebs Mike

Michael Moebs

What would a McDonald’s OD look like?

Overdraft prices change annually for large-asset-size FIs and every several years for FIs less than $100 billion in assets, according to Moebs data.

“Plus, consumers are told overdrafting is bad,” said Moebs.

Walmart has 18.6% of all 625 million consumer checking accounts and is the national market share leader with 116 million checking accounts. Walmart charges $15 per OD.

“Combined, Walmart and McDonald’s could control over half of all consumer checking,” said Moebs, who pointed out Walmart follows McDonald’s-type pricing, too.

Moebs said the hypothetical McDonald’s OD price would be less than $15 and change two to three times a year.

“McDonald’s would price to overthrow Walmart,” he said. “At less than $15 and changing the price at least twice a year, McDonald’s would capture the checking market and surpass Walmart. FIs need to make checking and overdrafts have the value that both McDonald’s and Walmart provide…Welcome to McDonald’s, can I take your order? A Quater Pounder with cheese and McDonald’s checking with overdraft services.”

Comments

Popular posts from this blog

NCOFCU YouTube Video Minies

  https://www.youtube.com/playlist?list=PLT3lzRTXnHw4YHnT2TzILxP7Rfkjn0eT1  __ ______________________________________________ Check out NCOFCU's additional features: First Responder Credit Union Academy Podcasts YouTube Mini's Blog Job Board

Sunday Reading - 401(k) plans, explained

  Worker Nest Eggs       401(k) plans, explained Originally intended for corporate executives, the 401(k) is now, arguably,   the most famous section of the US tax code   and a staple in worker benefits packages and personal finance guides ( watch 101 ). Roughly 70 million Americans, with a total of more than $7T invested , use these long-term, tax-advantaged accounts to build toward a more secure retirement. Some critics claim that with 401(k) plans, companies offloaded the risk of retirement savings to workers without the training to avoid volatile portfolio mixes. Amid the 2008 financial crisis, many 401(k) plans lost over a quarter of their value , an event that hit those near retirement particularly hard. ... Read our full explainer on the plan...

Why credit unions need to be formulating a strategy for crypto & digital...

“The future of money isn’t coming – it’s here, growing at $4 trillion and accelerating,”  DaLand CIO, Jon Ungerland said in a statement. “Their solution ensures the institutions that matter most to American communities don’t miss the transition.” https://www.dalandcuso.com/videos-podcasts __ ______________________________________________ Check out NCOFCU's additional features: First Responder Credit Union Academy Podcasts YouTube Mini's Blog Job Board

Fed Gets Green Light for Interest Rate Cuts as Unemployment Rate Jumps to 4-Year High

The Federal Reserve is now seen as likely to   cut interest rates   multiple times before the end of the year, following another weak jobs report that showed unemployment jumping to a four-year high. The U.S. economy added just 22,000 jobs in August, less than economists had expected, the  Bureau of Labor Statistics  reported Friday. The unemployment rate rose to 4.3%, up slightly from 4.2% in July but hitting the highest level seen since October 2021, when the economy was still recovering from pandemic-driven layoffs. Although the new jobs report was troubling news for the economy, for prospective homebuyers with secure jobs it likely means further easing in  mortgage rates  in the days to come. Mortgage rates hinge primarily on the yields of  10-year Treasury notes , which plunged Friday to their lowest level since early April, when President  Donald Trump 's Liberation Day tariff announcement sparked panic in financial markets. It signals furth...

The Federal Reserve and How it Works

  The Federal Reserve       Background No institution wields more power in US finance than the Federal Reserve—but opinion polls indicate most Americans  don’t know  what it does. Known casually as “the Fed,” the century-old independent central bank sets interest rates, determining how much ordinary people pay for mortgages, car loans, and more, all to achieve its dual mandate of price stability and maximum employment ( read 101 ). Consisting of a central board of governors working in tandem with 12 regional banks, the Fed also manages the US money supply and acts as the lender of last resort. The Origins of the Fed Throughout the 19th century, the US faced  periodic economic downturns , which resulted in financial panics. Customers raced ...