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.

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

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.”

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