More consumers are turning to fintech banking companies to meet their needs. A 2022 FICO report found that consumer expectations are also shifting. Some traditional banks have responded by reviewing overdraft fee policies or services.
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Fintech banking platforms like Chime and Current are becoming more popular among consumers . What does this mean for banking? We’ll explain how consumer expectations are shifting in the banking industry and what this may mean for you. Why fintechs are becoming more popular According to a 2022 Cornerstone Advisors report commissioned by FICO , consumer behaviors and expectations for banking are changing and traditional banks have to adapt to these needs.
The research found that younger generations — specifically, Millennials and Gen Z — are more likely to use digital banks for their primary checking accounts than a community bank or credit union. The report also states the percentage of Gen Z who reported having a checking account with a national bank decreased from 35% in 2020 to 25% recently. “The biggest thing I think consumers need to understand is that it’s actually very easy to manage a lot of these fintech relationships,” says Darryl Knopp, FICO’s senior director of portfolio marketing .
Knopp points out that fintech banking platforms resonate with consumers because they have products that are easy to understand and different. Since products and services are based online, it’s easy to manage an account. Some fintech platforms also offer 24/7 customer support or live chat features to communicate.
How banks are responding to fintech companies According to the mentioned FICO report, two areas where fintech companies may stand out to consumers for commonly offering free overdraft protection or savings tools. Here’s how traditional banks are responding to address consumer needs. Overdraft fees Several big banks are rolling out changes to overdraft policies in 2022.
The Consumer Protection Bureau is also monitoring these changes and making sure that changes result in fewer fees for consumers. Here’s how 10 of the largest brick-and-mortar banks approach overdraft fees and overdraft protection programs. Chase : Chase has changed its overdraft policy so customers can overdraw up to $50 from their bank account without having to pay the $34 overdraft fee.
If you overdraw more than $50 from an account, you also have until the next business day to restore your balance to avoid paying a fee. Bank of America : In May, Bank of America reduced its $35 overdraft fee to $10. The bank also got rid of its fee for utilizing overdraft protection services when you transfer money from another bank account.
Wells Fargo : Wells Fargo is no longer charging a fee for using overdraft protection if you have a linked bank account. During the third quarter of 2022, Wells Fargo is also modifying overdraft fee policies. If you overdraw from your account, you’ll have 24 hours to restore your account without having to pay a fee.
Citi : In February, Citi announced that it would get rid of overdraft fees and overdraft protection fees. These changes will be taking place this summer. US Bank : In January, US Bank did away with some of its overdraft fees.
US Bank now allows you to overdraw up to $50 from a bank account without paying a fee. If you have overdrawn by more than $50, you also have until 11 p. m.
ET of the following business day to restore your account balance without facing a charge. Truist Bank : In January, Truist announced it would eliminate overdraft protection fees. The bank is also going to offer a new checking account that doesn’t charge overdraft fees and allows customers to overdraw up to $100 from an account.
The checking is expected to be available sometime during the summer. TD Bank : In February, TD Bank stated it would be making several changes to overdraft policies throughout 2022. TD Bank will be eliminating overdraft protection transfer fees.
Customers will be able to overdraw up to $50 from their bank account without having to pay an overdraft fee. If you overdraw more than $50 from an account, you also have 24 hours to restore your balance to avoid paying a fee. Fifth Third Bank : Fifth Third Bank allows you t overdraw up to $5 without paying a fee.
The bank also offers “Extra Time” with the Fifth Third Bank Momentum Checking Account. If restore an overdrawn balance before midnight ET on the following business day after your account is overdrawn, you won’t have to pay an overdraft fee. Citizens Bank : This month, Citizens Bank announced it would eliminate overdraft protection fees if you have a linked savings account.
The change will be taking place in the middle of 2022. Savings tools According to a 2022 J. D.
Power customer satisfaction study , retail banks with spending and budgeting tools are seeing an increase in customer satisfaction. However, the same study also reports consumers still want a more personalized customer experience. Knopp points out that brick-and-mortar banks have the potential to grow in this area.
“This is an area where banks can compete very well. They often know much more about the customer. They have multiple products that can help address some of these challenges,” says Knopp.
Knopp adds that the simplest way for traditional banks to remain competitive with fintech is to partner with them. If financial institutions cannot advance their technological services, fintechs could provide these tools for them. Tips for choosing where to bank With more banking options, Knopp says consumers can begin to learn more about specific banking products and services.
For example, you can look at both fintech companies and traditional banks and determine if particular features — like early direct deposit or budgeting tools— stand out to you. Alina Leon, a paraplanner at Beacon Financial Planning, Inc . , says local financial institutions may be worth considering if you have already established a good relationship with a banker or plan on applying for a mortgage or loan in the future.
“If you’re fine with having everything online, an online account may work for you. But also it will be more difficult to perform some activities if you need to get a bank check or exchange currencies,” adds Leon. Knopp also advises people to carefully review new fintech platforms and be aware of the precise services and products provided.
“If a group is very new, you certainly want to evaluate their stability,” says Knopp. “Are they going to be around? How easy is it to engage with them? Have a hard look at it. ” Sophia Acevedo, CEPF Junior Banking Reporter Sophia Acevedo is a junior banking reporter at Insider who covers banking and savings for Personal Finance Insider.
She is also a Certified Educator in Personal Finance (CEPF). She joined Insider in July 2021 as a fellow for the Personal Finance Insider Reviews team. Before joining the Insider team, she was a freelancer based in Los Angeles and worked briefly in publishing.
She also graduated from California State University Fullerton in 2020. You can reach out to her on Twitter at @sophieacvdo or send a quick email at sacevedo@insider. com.
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From: businessinsider_us
URL: https://www.businessinsider.com/personal-finance/how-are-banks-responding-to-fintechs
