In recent years, there has been an increase in public distrust of banks.
A Gallup poll found that only one-third of Americans have faith in the banking industry. Why is this the case?
There are numerous reasons for this mistrust, all of which stem from trends that have occurred over the last 25 years or so.
For example, when you consider what millennials want from a bank account—convenience and low fees—it’s easy to understand why they’re dissatisfied with traditional banks. For these and other reasons, we need new financial services companies to help rebuild consumer trust.
In this guide, we’ll look at some of the factors that have contributed to a lack of trust, as well as what new financial services can do to help rebuild it and how they’re already doing so.
Banks are failing to keep up with the times
As previously stated, banks fail to meet their customers’ needs and desires.
People no longer want to wait in line for hours at a branch office––instead, they expect 24-hour access to their money via ATMs or mobile banking apps. Most importantly, they do not want fees that deplete their funds.
This is a huge issue for millennials who are often already in debt and trying to save money. Furthermore, banks have been slow to embrace new technologies such as mobile payments and blockchain. This has allowed startups to fill the void by offering more innovative products and services.
For example, companies now allow you to deposit checks using your mobile phone camera, eliminating the need to visit a bank in person. Other companies make it possible to send money internationally at a much lower cost than traditional banks.
Complicated terms and conditions
Another reason people don’t trust banks is that their products have complicated terms and conditions. It can be difficult, for example, to understand what APR you’re being charged on a loan or how your interest rate is calculated. Consumers are confused as a result, and they are more likely to make mistakes when signing up for a product.
SoFi is one company that is attempting to address this issue. They have created a product known as the “SoFi personal loan.” The terms and conditions of this loan are straightforward, and it’s simple to understand how your interest rate is calculated. Furthermore, there are no origination or prepayment penalties.
People want things to be as simple as possible when it comes to their finances. Companies like SoFi are helping rebuild trust in the banking industry by offering products with transparent terms and conditions.
Bad customer service
Another one of the main reasons people don’t trust banks is poor customer service.
This can manifest itself in various ways, such as long phone waits, unhelpful customer service representatives, or hidden fees. Poor customer service can result from poor management or banks that are so large that they no longer care about their customers.
As a result, some people have turned to alternative banking services like credit unions and peer-to-peer lending, where customer service becomes more personal due to the smaller size.
The 2008 financial crisis is another reason why people do not trust banks. When the housing bubble burst, many people lost their homes and savings. Many people lost faith in the banking system. As a result, increasing interest in alternative options such as peer-to-peer lending.
Complex industry jargon
For decades, banking has been an industry focused on secrecy and complex jargon to confuse customers. Because of this lack of transparency, consumers are unable to make informed decisions about their money and whether a product will benefit them or not.
Acorns, an investing app that automatically invests your spare change from everyday purchases into a low-cost ETF portfolio, is one company attempting to address this issue. The product’s beauty is that you don’t have to think about it, and there are no minimums or fees involved.
Consumers will find it easier to plan their finances due to this.
Customers can regain trust in banks by using a product like Acorns, which allows them to feel more in control of their money. When it comes to restoring consumer trust, transparency is essential.
Another reason people don’t trust banks is because of the fees they charge.
Overdraft fees, monthly account maintenance fees, and hidden ATM fees are just a few things people dislike about the traditional banking system. This is why online and mobile banking solutions have grown in popularity.
You can avoid many unnecessary fees, such as ATM fees and monthly account maintenance fees, by doing your banking online. Aside from avoiding these fees entirely, it also saves time because you don’t have to visit a branch or wait on hold for hours.
This has increased interest in alternative options such as credit unions, which have no penalties for using another bank’s ATMs, or peer-to-peer lending, which has no monthly fees for using the service.
Lack of financial literacy programs
One of the primary causes of this growing distrust in banks is a lack of financial literacy programs in schools.
People grow up not knowing how to manage their finances, and as a result, they often make poor decisions, such as taking out loans they cannot afford or accumulating debt because they don’t know any better.
When it comes time to repay these loans, this can cause a lot of stress and anxiety, and it can even lead to people declaring bankruptcy. Banks could do a lot more to help with this problem by offering financial literacy programs to their customers.
This would help them understand how to use the products they offer and reduce the likelihood of them making mistakes when applying for a loan or credit card.
Bank distrust will only grow as new financial services companies emerge and more people become comfortable with the idea of banking online. If banks want to regain their customers’ trust, they must find a way to keep up with these trends.
Profit over people
That is the motto of many of today’s banks. Many people have lost faith in current financial institutions because these institutions have made decisions that benefit shareholders rather than customers.
One example is how some banks raised their overdraft fees before the financial crisis. As a result of not paying back these fees, many people went into debt. Another case is when some banks decided to discontinue offering free checking accounts.
This made it more difficult for people to manage their finances because they had to pay a monthly fee to open an account. Alternative financial services firms that prioritize the customer over profit are beginning to emerge. These businesses are successful because they recognize that if you take care of your customers, they will take care of you.
Bank distrust is at an all-time high, and it’s clear that something needs to be done to restore trust.
New financial services companies must continue to emerge and provide better options for people to reverse the trend of bank distrust. This is how we can restore trust in these institutions and ensure a prosperous future for consumers and businesses.
New financial services firms are paving the way by creating innovative products and services that meet the needs of millennials. These companies are helping to restore trust in the banking system by providing simplicity, transparency, and excellent customer service.
These new financial services help rebuild trust
Millennials are dissatisfied not only with poor customer service and excessive fees, but they also want more innovative products that make their lives easier or save them money. This is where new financial services come into play. They are helping to rebuild trust with millennials by providing products and services that meet their needs.
Square is one company that is excelling at this. They have created a mobile app that allows you to send and receive payments while tracking your spending. This app is ideal for small businesses because it makes tracking expenses simple. Square is also developing a new product that will allow you to borrow money directly from them without going through a bank.
This type of innovation is precisely what we require to reestablish trust in the banking industry. New financial services companies are helping to rebuild trust with millennials by providing products and services that meet their needs.
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