FinTech Doesn’t Mourn The Death Of The Bank Branch

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A major shift is happening in the personal banking world. More people than ever before are visiting their local bank only to find its doors are closed for good. According to the Wall Street Journal’s latest count, banks shuttered more than 1,700 branches across the country in 2017. Their closures aren’t just inconvenient. They’re depriving financial services to plenty of customers, but in reality, many of those affected by branch closures were never fully supported by these banks in the first place. It’s only through convenient FinTech alternatives that they may have greater financial participation.

It’s a global shift

It isn’t an American-born problem. Bank closures rates are increasing all around the world. In the UK, banks are closing 60 branches every month, having closed nearly 3,000 locations over three years. Meanwhile, European banks shuttered 9,000 branches in 2017 alone, with plans to close more in the upcoming year.

Their replacement goes digital

The biggest retail banks cite their reasoning to shutter doors as purely commercial. As fewer people visit their branches in-person, more customers use their online banking services.The rise in closure rates mirrors that of the increasing online transaction. It only makes sense to focus on those services favored by their customers.

But according to the Pew Research Center, only 51 percent of Americans bank online. This data is overwhelmingly skewed towards the young and economically well off. Older people, as well as those making under $30,000 a year and/or living in rural areas of the country, are less likely to bank online despite having access to the Internet.

Traditional banking’s online services still alienate

If it’s not access to the Internet that’s stopping them from banking online, this trend speaks of other barriers preventing these demographics from banking normally.

The old and poor have always represented a customer base ignored by the biggest banks. They represent the credit poor or underbanked who never had the same access to financial services. That’s because the typical checking or savings accounts come with too many conditions (like a minimum balance) or monthly fees for these individuals to keep. Meanwhile, their credit histories make it difficult to secure personal loans through conventional channels. If their applications were approved, they would have to come into one of the few branches still open to meet with an advisor—even if their closest branch was miles away or only open when they’re scheduled to work.

FinTech alternatives offer greater access

Mobile banks and other FinTech apps aim to catch those customers who fall through the cracks with more affordable and more convenient online services than traditional banking. Mobile banks do away with fees and other conditions that make it hard for the working poor to open and maintain checking and savings accounts. These banks digitize daily banking tasks without any affiliation with the biggest retail branches. Their customers can deposit checks or transfer money online at no added charge, and they aren’t expected to maintain a specific balance.

Meanwhile, other FinTech alternatives offer a greater range of financial services, including opportunities to borrow and invest without needing exhausting financial histories, collateral, or a lot of capital. FinTech’s simplified banking experience is part of the reason why companies like MoneyKey hope to engage those turning away from traditional banks. They’ve eliminated much of the red tape that can delay online requests, so they can offer cash loans and other services faster than retail banks. Since many of them only have an online presence, in-person verification is not only unnecessary but impossible. Their automated systems allow them to process applications at any time, giving those who work odd hours a chance they wouldn’t normally have when securing assistance through traditional means.

And it’s working. Each year, FinTech’s market share has grown, and now it’s a major force within the industry. According to TransUnion, FinTech makes up 32 percent of the market share of personal loans, while banks trail at just 29 percent.

As the biggest retail banks are shutting its doors, they hope to gain customers by offering their services online. But they’re still operating the same legacy models that alienate the people most affected by their closures. Until these systems change, they won’t gain new customers from the credit thin or underbanked. These consumers are choosing FinTech alternatives that cater to their need for simple and convenient financial services.

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