What’s New With Banking 2022

A great place to start this year’s banking update is by rereading last year’s update, which covered pandemic impacts on digital banking and the emergence of challenger and neo banks. The updated picture on these new types of banks is not so rosy. Big FinTech seems to be winning out.

This year we add a customer engagement layer to that backdrop, and discuss bank options for particular situations. Finally, we cover a recent increase in scams using the bank version of P2P—Zelle.

NeoBanks in 2022

Forbes reports that Dave, Varo and Chime, neobanks mentioned in last year’s update, are all facing capital contraints (running out of cash). Their customer acquisition costs are much higher than the mega fintech firms. BNPL options are also eating into the neobank pie.

“The pioneers of the neobank era—Simple, Moven, PerkStreet Financial, Monzo, etc.—should be celebrated. But the days of a general purpose, digital-first, retail bank-like fintech—that doesn’t lend and has no charter—is over.”

Customer Experience/Banking’s New Reality

An article in The Financial Brand draws the distinction between the customer experience with banks and customer engagement with banks. Customer experience refers to the transactional experiences one has with a bank. With the rapidly changing economic environment of late–record low consumer confidence and rising interest rates–customers are looking for more than a sexy bank app for help. They may need more personal assistance in these challenging times. They want to be able to seamlessly transition from self-service functions to some type of personalized assistance.

Examining customer engagement takes a much broader view of the customer/bank relationship, and looks for any missing pieces. Think about your relationship with your bank—what keeps you with that bank?

“Rivel recently released their Quarter 2, 2022 CXLign Banking Benchmarks report. Among other customer preferences and trends, they found that:

• 62% of banking customers prefer digital banking to do common transactions (depositing a check, paying a bill, etc.)
• 57% of banking customers prefer human assistance for more important transactions (sending a wire transfer, setting up a new account, etc.)

While the data may not be surprising, it does underscore a key consumer insight — people want choices. Some may prefer digital, some may prefer human assistance and those preferences may change based on the specific need on that day. The challenge is ensuring whichever channel they start in allows them to conveniently self-serve, research and connect with a specialist or get support and assistance when needed.”

This Forbes article describes how banking strategy must change to reflect the fact that branches and geography are no longer relevant for the majority of customers who prefer digital banking.

“Historically, banks sold through branches and in (more or less) narrowly defined geographic areas.

That banking world no longer exists.

Three in 10 Gen Zers and Millennials now consider a digital bank or fintech to be their primary checking account provider and I would bet that most of them have no clue where that provider’s headquarters is located (or care, for that matter).”

What will ensure a profitable future for banks? Either embedding (their) financial services into popular non-financial websites, or embedding popular fintech apps into their own digital interface.

Bank Selection/Management

Traditional banks use something called “ChexSystems” to review a potential customer’s banking history, much like lenders check a credit score and history.   For those who have a negative banking history (lots of overdrafts), and for certain groups of people (like formerly incarcerated individuals), opening a bank account is not possible at a traditional bank. They must look for what are known as “second-chance bank accounts.” Banks that offer these accounts do not check a person’s banking history. There are definitely restrictions, and often fees attached to these types of accounts, but this is a way for people to get back into the banking world. Business Insider takes a look at a few of the highest rated options.

For the latest on good bank options for college students, this BankRate article that actually focuses on helping student athletes manage their finances would be a good place to start. It elaborates on the benefits offered by the top five banks it includes in the list, then goes on to look at specific types of checking and savings accounts.

On a slightly different but important note, this Business Insider article describes how to safely close a joint bank account. This is particularly important if you are splitting with a romantic partner/spouse. You should be aware of the potential for others named on the account to drain it before you actually close the account. Joint accounts, by definition, afford all named parties equal ownership. Each party can make deposits or withdrawals independently, but change of ownership (like closing the account), needs the approval of all parties.

Zelle Scams

Zelle is the peer-to-peer payment system offered through banks. 100 million people have access to this free app. According to the New York Times, $490 billion was sent through Zelle last year, which is more than twice the $230 billion sent through Venmo.  (Relating this to the previous customer experience segment, this would be an example of a fintech-type app embedded in a bank’s online presence.)

Like other P2P apps, the money transfer is instantaneous and irreversible. Thus, it is not a surprise that scammers are targeting their scams using Zelle. This article from CNET describes in great detail how these scams work, and provides guidance on how to avoid them. If you do fall for a scam, report it immediately to your bank. Many will be reluctant to reimburse you, but it is important to know your rights:

“In June 2021, the Consumer Financial Protection Bureau clarified its position on banks’ required compliance with the Electronic Fund Transfer Act of 1978, also known as Regulation E. The CFPB says that “if a third party fraudulently induces a consumer into sharing account access information,” that consumer should receive the same protections as if the money were acquired from a stolen debit card or other banking “access device.”

The EFTA also includes a big reason to report your Zelle scam immediately. The law requires consumers to notify their banks of loss or theft within two business days to receive full protection.”