Why your bank, credit card issuer is texting you

By Benjamin Salisbury

Many Brits use text messaging every day for both personal and business, and many businesses use text messages to communicate with customers. For instance, your favourite retailer may send you a coupon code via text, or alert you to sales or promotions. Even banks have boarded the text messaging train, and it doesn't seem to be slowing down any time soon.

Here are four reasons your bank may be texting you, and why it's beneficial to you -- and them.

Texts your bank may already be sending you
1. Fraud alerts

Banks are already using text messages to combat fraud. text-from-bank

"Barclaycard provides various fraud alerts, which are issued when behaviour that's out of a customer's normal spending patterns is observed," said a Barclaycard spokesperson in an emailed response to questions.

 A suspicious charge might include an unusually large purchase or an item bought in a location where you don't often use your card.

The text alert will ask the cardholder to confirm or deny the transaction. If there is no reply, the bank may put a temporary hold on the card until the purchase has been verified, or may follow up with a phone call.

Of course, as a customer, you must opt in to receive these fraud alerts.

"Customer feedback on the alerts process was very positive," the Barclaycard spokesperson said.

2. Balance alerts
Text messages may also alert you that your balance has dipped below a certain point, or that you are nearing your overdraft limit.

For instance, First Direct sends customers a text warning that they will have to pay a £5 daily fee for going past their overdraft limit unless they clear the balance on the same day.

Times change, though, and that deadline for clearing a balance has been moved back. In the old days, customers had to clear that balance by the time the banks shut at 4 pm. First Direct customers can transfer funds over up until 11:45 pm. Many other banks offer a similar service.

Some banks have a program that allows you to opt into a service that automatically texts you when you have gone over your overdraft limit. Other banks will provide this information if you text the word "balance" to a certain number at any time.

3. Money transfer
Lloyds Banking Group's Pay a Contact service lets Lloyds and Halifax customers "send or receive money using the recipient's mobile number, rather than their sort code and account number," a Lloyds Banking Group spokesperson said in an emailed response to questions.

"This service is available via our online and mobile banking portals, and both the sender and receiver must be registered to use the service."

4. Coming soon: End of promotional deal alerts
The Financial Conduct Authority (FCA) -- concerned that many credit card customers are failing to pay off their balances before the end of 0% interest balance transfer periods -- is pushing for credit card companies and banks to text cardholders when their balance transfer offer is coming to an end.

The FCA will be publishing information on the voluntary remedies, including the balance transfer text alerts, later in 2016, according to Richard Koch, head of policy for The UK Cards Association.

Capital One has already trialled a program alerting customers by text and email to make more than the minimum payment. Barclaycard currently notifies customers when they are near the end of a promotional interest rate period. The FCA has recommended that all banks and credit card companies should have this service in place by 2017.

Halifax is working on expanding its existing service, which alerts consumers that their new credit card is on the way, Paul Gordon, managing director of credit cards for Halifax, said in an emailed response to questions. The expansion will include messages reminding consumers that they are close to or have reached their credit limit, or alerting customers that their payment is overdue.

Benefits of bank texts
For consumers, text messages offer a quick, convenient way to receive information from your bank. And the texts get results. FCA trials found that text and email alerts were very effective in getting customers to take action when they receive warnings about possible fraud.

For banks, texting is cheaper and more effective than phoning customers, and the alerts help reduce fraud which, of course, saves the banks money. In the US, Visa found that alerts have led to a 40% drop in subsequent fraud losses.

"Giving card customers more information about the benefits of paying more each month, along with the flexibility to shift repayment dates to match income dates would help borrowers," Melanie Taylor, a debt expert at the Debt Advisory Centre, said in an emailed answer to questions.

"People who are in financial difficulties are often disengaged from their finances, so triggers like a text to remind them that their payment is due are likely to be very helpful."

See related: Pay friends via mobile with P2P payments, How do banks benefit from long balance transfer offers?, With long 0% balance transfer deals, one strike, you're out

Published: 13 September 2016