While it may seem like almost everybody today has a savings account at a traditional bank, the reality is that a growing population of people are becoming dissatisfied with brick-and-mortar banks. Due to this, research is showing increased interest in fintech solutions from customers looking for alternatives to the inefficient processes and poor customer experiences present in traditional banking.
With an average annual growth rate of nearly 25%, the financial technology industry is one of the fastest-growing markets worldwide. As a corollary to this growth, regular banks are losing customers as they struggle to compete with fintech providers that are disrupting the industry with lower fees and innovative, digital first features. So why exactly are people choosing to move away from traditional banking in favour of alternative digital solutions? Let's dive into four reasons people today feel that conventional banks are not relevant to their needs.
1. Low Earning Interest Rates.
A primary reason people are moving from traditional banks is concerning their low-interest rates. Brick and mortar banks are coming under increasing scrutiny as interest rates on savings accounts fall ever closer towards 0%. Even as inflation rises to historic levels – which normally increases interest rates – the banking sector is giving its customers limited incentives to save their cash in traditional accounts.
While keeping interest rates low may represent a good short-term Return on Investment (ROI) for the banks, this ROI is likely at the expense of their customers’ loyalty and lifetime value. People are no longer motivated to save money within the traditional banking institutions as receiving a higher return on savings plays a vital role in their financial expectations.
Most surveys reveal that the best savings accounts are with online banks and crypto-centric saving wallets as they offer better interest rates, making them more attractive. And of course, a significant percentage of the underbanked are now putting their money in Fintech and crypto as they receive better financial inclusion, services and can obtain higher returns. The newly innovative crypto-centric earning programs are also garnishing significant attention. Even though crypto, web3 and DeFi are still nascent technologies, they are garnering significant attention. For example, some providers offer customers staking-based membership programs that give access to APY rates up to 12% on their holdings, with no account limits, lock up periods or minimums.
2. High Cost/Fees
Many people desire to avoid traditional banks due to high fees. From monthly savings maintenance fees, monthly checking service fees to non-sufficient funds, overdraft, wire deposit fees, cheque processing costs and so on, there are just too many fees that come with operating accounts in traditional banking. Complaints of these high bank charges are growing at alarming rates - driving regulatory authorities to implement various requirements to bring better protection to consumers.
In contrast, online banks and crypto exchanges have positioned themselves are saviours by charging low to no fees as they offer free everyday services. For example, there's no monthly maintenance fee, no minimum deposits, free peer-to-peer money transfers, free ATM withdrawals. The costs the consumer experiences are within their control. For example, a crypto exchange will only pass-through fees when one performs a crypto trade from one coin to another or fiat.
3. Trust, Transparency, and Depersonalization
Many people see regular banks negatively for different reasons, including selling customers' products they don't need, not disclosing the fees attached to specific accounts and transactions, creating fake accounts for customers, and more. These behaviors and lack of transparency bring forth fear in many people.
Depersonalization of banking is another crucial milestone in people's departure to more modern ways of banking. Regardless of our engagement, whether online or in-person, people want to be recognized as unique, with solutions tailored to satisfy their specific wants and needs. 66% of consumers expect brands to understand their individual needs, while 80% of consumers are more likely to onboard with a company that provides a tailored experience.
Many Fintech operators and crypto exchanges invest heavily in developing personalized experiences from how users engage on their app or platform, what content and products they see and how they receive communication. Many fintech operators are using bleeding edge technology including A.I., behavior tracking and machine learning to understand their customers better and provide tailored services. The result is a superior customer experience that grows and develops with the user. When compared to this customer-focused innovation, traditional banking users are feeling increasingly neglected and undervalued. Given the amount of data the absence of trust, transparency, and personalization, people gravitate towards digital banks with clear parameters around accounts to avoid cost surprises and where they are recognized and valued as individuals.
4. Limited Technology and Security Protocols
Technology is imperative. It is the very pillar of life as access to the internet has become a human right in many countries worldwide within the last decade. These innovations intermingle in many aspects of everyday life, from how we drive, video conference, phone, cook, engage in leisure activities, etc. Why would banking and financial goal management be any different?
Fintechs and crypto exchanges are a driving force of innovation from their products and services and their understanding of protecting their users sensitive financial, digital assets and identity data. Many people agree that Fintechs do this 100x greater than traditional banks by leveraging leading technologies like blockchain, biometrics, multifactor security authentication protocols, behavior tracking, device I.D. intelligence, and more. They know how a combination of these tactics is vital to building brand trust and confidence necessary for people to store their assets and information.
Unfortunately, traditional banks are not in the same ranking to keep up with the innovations that could improve the quality of their services. Many have not integrated even some of the more straightforward authentication manners of biometrics or two-factor authentication. As a result, people feel a lack of trust in providing their sensitive information and finances.
Gone are the days when bank customers had to endure whatever traditional banks offered to them. With many people getting fed up with the excesses of regular banks, they are exploring other banking solutions that meet their needs and expectations.
The world is drastically changing to Fintech and cryptocurrency centric programs. Many crypto exchanges offer multiple wallets, interest-earning wallets, high yield returns on staking investments and more. Connect Financial brings the world's first crypto-backed credit card, powered by your crypto holdings with zero-touch on your coin value. Expanding the capabilities of crypto to everyday life even further and enabling everyone worldwide, regardless of status and age, agonistic access to credit that meets individual needs. Credit with total flexibility and control without the hassles of credit checks and slow applications.
Additionally, Connect Financial offers a wide range of digital wallets to buy, sell and hold coin and fiat, alongside their high-interest investment wallets. Solutions like Connect's empowers consumers to take control of their financial management and goals. Sign up and get your Connect wallet or crypto-backed credit card today.