How do banks react to fintech?

How do banks react to fintech?

How do banks react to fintech?

  • More and more consumers are turning to fintech bankers to meet their needs.
  • A 2022 FICO report found that consumer expectations are also shifting.
  • Some traditional banks have responded by revising overdraft policies or services.

Fintech banking platforms such as Chime and Current are becoming increasingly popular among consumers.

What does this mean for the banking sector? We will explain how consumer expectations are shifting in the


banking

and what this can mean for you.

According to a 2022 report by Cornerstone Advisors, commissioned by FICO, consumer behavior and expectations for banking are changing and traditional banks must adapt to these needs.

The survey found that younger generations – especially millennials and Gen Z – are more likely to use digital banks for their primary needs


checking bills

than a community bank or credit union. The report also notes that the percentage of Gen Z who reported having a checking account with a national bank dropped from 35% in 2020 to 25% recently.

“The most important thing I think consumers need to understand is that it’s actually really easy to manage a lot of these fintech relationships,” said Darryl Knopp, senior director of portfolio marketing at FICO.

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 is easy to manage an account. Some fintech platforms also offer 24/7 customer support or live chat features to communicate.

How banks respond to fintech companies

According to the said FICO report, there are two areas where:


fintech companies

can stand out to consumers because they often offer free overdraft protection or savings aids.

This is how traditional banks respond to consumer needs.

Overdraft Fees

Several large banks will implement changes to the overdraft policy in 2022. The Consumer Protection Agency also monitors these changes and ensures that changes reduce costs for consumers.

Here’s how 10 of the largest brick-and-mortar banks approach overdrafts and overdraft protection programs.

  • PursuitChase has changed its overdraft policy to allow customers to withdraw up to $50 from their bank account without having to pay the $34 overdraft. If you withdraw more than $50 from an account, you also have until the next business day to recover your balance to avoid paying a fee.
  • Bank of America: In May, Bank of America reduced its overdraft facility from $35 to $10. The bank also waived the fee for using overdraft protection services when you transfer money from another bank account.
  • Wells Fargo: Wells Fargo will no longer charge you for using overdraft protection if you have a linked bank account. During the third quarter of 2022, Wells Fargo will also change its overdraft policy. When you withdraw money from your account, you have 24 hours to recover your account without having to pay a fee.
  • Place: In February, Citi announced that it would eliminate overdraft fees and overdraft protection fees. These changes will take place this summer.
  • US bank: In January, US Bank canceled some of its overdrafts. With US Bank, you can now withdraw up to $50 in red from a bank account without paying a fee. If you are over $50 in overdraft, you also have until 11 p.m. ET of the next business day to restore your account balance without being charged.
  • Trust bankIn January, Truist announced that it would abolish overdraft fees. The bank is also going to offer a new checking account that doesn’t charge overdrafts and allows customers to withdraw up to $100 from an account. The check is expected to be available sometime in the summer.
  • TD bench: In February, TD Bank announced that it would make several changes to its overdraft policy over the course of 2022. TD Bank eliminates overdraft protection transfer fees. Customers can withdraw up to $50 from their bank account without having to pay an overdraft fee. If you withdraw more than $50 from an account, you also have 24 hours to recover your balance to avoid paying a fee.
  • Fifth Third Bank: Fifth Third Bank allows you to withdraw up to $5 in red without paying a fee. The bank also offers “Extra Time” with the Fifth Third Bank Momentum Payment Account. If you restore an overdraft before midnight ET on the next business day after your account is overdrawn, you will not be charged an overdraft fee.
  • citizen bank: This month, Citizens Bank announced it would eliminate overdraft fees if you have a linked savings account. The change will take place in mid-2022.

Tips for choosing where to bank

With more banking options, Knopp says, consumers can learn more about specific banking products and services.

For example, you can look at both fintech companies and traditional banks and determine whether certain features, such as 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 already have a good relationship with a banker or plan to apply for a mortgage or loan in the future.

“If you’re fine with having everything online, an online account might work for you, but it’ll also be harder to perform some activities if you need to get a bank check or exchange currencies,” Leon adds.

Knopp also advises people to carefully review new fintech platforms and be aware of the precise services and products being provided.

“When a group is very new, you definitely want to evaluate their stability,” Knopp says. “Will they be around? How easy is it to get along with them? Take a good look at it.”