- More and more consumers are turning to fintech banking companies to meet their needs.
- Consumer expectations are also changing, a 2022 FICO report found.
- Some traditional banks have responded by reviewing overdraft fee policies or services.
Fintech banking platforms such as Chime and Current are gaining popularity among consumers.
What does this mean for the banking industry?We will explain what consumers expect in
banking
and what that might mean to you.
Why fintech is growing in popularity
According to the 2022 Cornerstone Advisors report commissioned by FICO, consumer behavior and expectations of banking are changing, and traditional banks must adapt to these demands.
Younger generations – especially millennials and Gen Z – are more likely to use digital banking for their primary business, study finds
Check account
Not community banks or credit unions. The report also noted that the percentage of Gen Z who reported having a checking account with a national bank dropped from 35% in 2020 to 25% recently.
“I think the most important thing consumers need to understand is that managing a lot of these fintech relationships is actually very easy,” said Darryl Knopp, senior director of portfolio marketing at FICO.
Knopp noted that fintech banking platforms resonate with consumers because of their easy-to-understand and differentiated offerings.
Because the products and services are online-based, managing accounts is easy. Some fintech platforms also offer 24/7 customer support or a live chat feature to communicate.
How banks are responding to fintech companies
According to the aforementioned FICO report, there are two areas
Fintech company
May stand out among consumers for often offering free overdraft protection or savings tools.
Here’s how traditional banks are responding to consumer demand.
Overdraft Fee
Several big banks are making changes to their overdraft policies for 2022. The Bureau of Consumer Protection is also monitoring these changes and making sure they reduce costs for consumers.
Here’s how the 10 largest brick-and-mortar banks handle overdraft fees and overdraft protection programs.
- catch up: Chase changed its overdraft policy so customers can overdraw up to $50 from their bank accounts without paying the $34 overdraft fee. If you overdraw more than $50 from your account, you must also restore your balance by the next business day to avoid fees.
- Bank of America: In May, Bank of America lowered its $35 overdraft fee to $10. The bank also waives fees for using overdraft protection services when you transfer money from another bank account.
- FuGuo bank: Wells Fargo no longer charges for using overdraft protection if you have linked bank accounts. In the third quarter of 2022, Wells Fargo is also revising its overdraft fee policy. If you overdraft your account, you will have 24 hours to restore your account without incurring any fees.
- Citi: In February, Citi announced the elimination of overdraft fees and overdraft protection fees. These changes will happen this summer.
- Bank of America: In January, Bank of America eliminated some overdraft fees. Bank of America now allows you to overdraft up to $50 from your bank account with no fees. If you’ve overdrafted more than $50, you can also restore your account balance at no charge by 11pm ET the next business day.
- trust bank: In January, Truist announced it would eliminate overdraft protection fees. The bank will also offer a new checking account that has no overdraft fees and will allow customers to overdraw up to $100 from the account. The inspection is expected to take place sometime during the summer.
- TD Bank: In February, TD Bank said it would make several changes to its overdraft policy throughout 2022. TD Bank will eliminate overdraft protection transfer fees. Customers will be able to overdraft up to $50 from their bank account without overdraft fees. If you overdraw more than $50 from your account, you have 24 hours to restore your balance to avoid fees.
- Fifth Third Bank: Fifth Third Bank allows you to overdraft up to $5 without paying a fee. The bank also offers “extra hours” on the Momentum checking account at Fifth Third Bank. You will not be charged an overdraft fee if your overdraft balance is restored by midnight EST on the next business day after your account is overdrawn.
- National Bank: This month, Citizens Bank announced it would remove overdraft protection fees if you have a linked savings account. Changes will take place in mid-2022.
Tips for choosing a bank deposit location
With more banking options, consumers can start to learn more about specific banking products and services, Knopp said.
For example, you can look at fintech companies and traditional banks and determine if a particular feature, like early-stage direct deposit or budgeting tools, appeals to you.
If you already have a strong relationship with a banker or plan to apply for a mortgage or loan in the future, a local financial institution may be worth considering, says Alina Leon, associate planner with Beacon Financial Planning, Inc.
“If you’re comfortable with everything online, an online account might work for you. But if you need to get a bank check or exchange money, it’s also more difficult to perform certain activities,” Leon adds.
Knopp also advises people to scrutinize new fintech platforms and understand the precise services and products on offer.
“If a group is very new, of course you want to assess their stability,” Knopp said. “Will they be around? How easy is it to socialize with them? Look closely.”