Survey Shows that Majority of Americans Believe that Traditional Banks Aren’t Keeping Up with the Times
Survey finds majority of Americans believe traditional financial institutions are failing consumers and small businesses while nearly 70% look to FinTech Solutions
Three of five Americans believe that their banks are failing to keep up with their needs in today’s connected world, leading many to wonder if traditional financial institutions will disappear and what kinds of financial technology (FinTech) companies will emerge to take their place.
As it turns out, the majority (57%) believe that traditional financial institutions as we know them will cease to exist within their lifetime while nearly 70% believe that it’s FinTech solutions that are making their lives and financial health better. Blumberg Capital, a San Francisco based early-stage venture capital firm, today released findings that paint a tumultuous future for traditional financial institutions that aren’t embracing new technology as more and more Americans migrate toward the innovative products and services offered by emerging FinTech companies.
FinTech Now the Norm
Conducted in association with Regina Corso Consulting, the national survey asked American adults what they thought about traditional banking institutions, FinTech companies and new financial technologies. At a high level, the survey found that not only do three in five Americans have a positive view of FinTech, but nearly 75 percent agree that FinTech provides consumers with more power over their finances. Additionally, the survey revealed
– 70% of Americans believe that new solutions such as digital banking, online lending, payments and financial services, are making financial transactions easier than ever.
-65% of Americans agree that FinTech levels the playing field by providing access to services previously only available to the wealthy.
-69% of Americans think the latest tech for financial tools will help everyone be better off financially.
-57% percent of Americans are under the belief that traditional banks as they know them will cease to exist within their lifetime.
“Between the negative headlines and American’s general distrust of large financial institutions, banking as we know it must and will change,” said David Blumberg, founder and managing partner of Blumberg Capital. “While no one knows what will happen in the banking business over the next 20 years – it’s clear that more Americans are increasingly dissatisfied and are excited to embrace new technologies. At Blumberg Capital we believe in this change and that is why we partner with forward thinking banks and invest in the companies at the center of the FinTech revolution. These banks and companies are providing consumers and small businesses access to new financial products and services that are helping save money, make smarter decisions and operate more efficiently.”
Where Traditional Financial Institutions Fail — “are no longer meeting the needs’”
Respondents overwhelmingly believe that traditional financial institutions should focus more on the average consumer and small businesses. Findings revealed that most Americans want access to flexible borrowing options, think that current traditional financial institutions charge too much interest on debt and believe that the “underbanked” need access to better financial services options. Other findings include:
-62% of Americans feel they pay way too much interest on debt.
-74% of Americans agree that it would be helpful if there was an automated and customized way to make sure they never miss a payment and always minimize the total interest expense on their loans.
-80% of Americans agree that financial institutions need to focus more on helping the average consumers and small business owners rather than the top 1% and big business.
-79% of Americans stated that they want access to flexible borrowing options that minimize their interest payments.
-59% of Americans said they would borrow from or loan money to a friend or family member to grow a small business if it meant paying less interest to banks.
-76% of Americans believe that financially underserved people such as those with low FICO scores or bad employment histories need access to options for loans/credits outside of traditional banks.
FinTech Growing Pains
While signs are pointing to a financial technology revolution, there are still some major challenges that are preventing wider adoption of FinTech services. These include a lack of awareness in some communities as well as concerns over security and privacy. The survey revealed the following:
-30% of Americans surveyed are not at all sure how they feel about FinTech, with lower income households being more likely to state this than higher income households
-72% of Americans listed security as something they worry about with the new banking services online and they are not completely confident their financial information is secure or private
-65% of Americans listed security as the main priority when considering features in a financial institution.
For a complete look at the survey findings, click here.
FinTech Companies Weigh In
Some of the founders and CEO’s of Blumberg Capital’s portfolio companies offered additional commentary on the survey results:
“Everyone knows that ubiquitous phones and data are changing products and services in banking, but those improvements have primarily benefited the well off. At Bee, we believe everyone deserves fair, high-quality banking — and that’s why we’re building better, cheaper mobile banking services to meet customer’s checking and savings needs.”
– Vinay Patel, CEO and co-founder, Bee
“It doesn’t surprise me that ‘three-quarters of Americans agree that small businesses face all kinds of barriers when applying for loans and other financial services. Historically, banks built and supported their best banking solutions for large companies, while offering ‘hand-me-down’ financial service solutions for their small business customers. At Bento for Business we’re changing that by providing our customers the best expense management solution specifically to meet small business needs.”
– Farhan Ahmad, founder and CEO, Bento for Business
“Banks and other financial services institutions are undergoing a massive wave of transformation in the delivery of services, focusing heavily on digital banking applications aimed at consumers and businesses. However, in order to gain rapid user adoption, they need to provide both an enhanced user experience and enhanced security. We believe that behavioral biometrics will play a critical role in meeting this challenge, providing frictionless authentication, seamlessly protecting users accessing a wider array of online and mobile banking solutions.”
– Eyal Goldwerger, CEO, BioCatch
“We’re experiencing a wave of change in financial services where technology is replacing the traditional way we bank. Continents and countries feel closer than ever as FinTech companies, like BLender, are powering the globalization of consumer finance. Through our P2P lending platform we provide cross-border credit opportunities in territories and in ways that up until now were unheard of. Financial borders will soon be a thing of the past.”
– Dr. Gal Aviv, CEO and co-founder, BLender
“Financial Institutions – through a stagnant lack of innovation and a history of neglect – have created a void in the market for FinTech startups to fill with superior products, improved customer experience, and lower fees. In standard Silicon Valley fashion, the entrenched players with fat margins are exposed to nimble startups that can deliver focused experiences at lower costs and to the overall betterment of the market. This is particularly true in SMB banking.”
– Sean Safahi, CEO, Bold Financial Technologies
“There is a huge percentage of non-prime consumers who are unable to access expensive durable goods without a monthly payment option. We think that’s unfair and agree with the 76% of Americans surveyed who said financially underserved people need more access to credit. At Cognical, we developed the Zibby lease purchase platform to fix this, both for retailers that wish to serve a massive customer base and for those consumers that want the choice and selection of shopping any where they want to: online or in-store. And importantly, customers that make on-time payments may graduate to nearprime and prime.”
– Brandon Wright, CEO, Cognical
“I’m in agreement that financial institutions need to wake up to reality that SMBs are overwhelmingly making up the ‘new U.S. economy’ and therefore have no choice but to fully embrace and cater to their specific needs. If traditional banks do not get on board quicker, they will continue to lose market share to FinTech-turned-digital-banks that are successfully meeting regulatory requirements and consumer demands such as serving as merchant acquirers that happily connect entrepreneurs with innovators who can provide much needed business credit.”
– Igal Rotem, CEO, Credorax
“Consumers across the country are overwhelmed by the complexity and volume of their debt. The current financial system consistently fails to help the average American with these issues, particularly minority and lower income communities. It’s exciting to be part of a FinTech revolution, with a platform like EarnUp, that lets consumers intelligently automate their financial lives, build wealth, and get out of debt”
– Matthew Cooper, co-founder, EarnUp
“For decades, it has been nearly impossible for consumers and financial professionals alike to analyze investments net of fees. It’s time that changes. Everyone should have access to transparent information about all aspects of their finances – including fees paid. At FeeX, we enable financial managers to show their consumer clients exactly how much is being charged by the asset managers – and then compare returns adjusted for fees – which on average, can consume 30% of the total account over time. Creating transparency helps people gain more power over their finances and be better prepared for their future.”
– Yoav Zural, co-founder and CEO, FeeX
“Roughly half of the American workforce is employed by small businesses, yet they are still largely underserved by traditional financial institutions. Startups like Fundbox are leveling the playing field by offering previously unavailable financial options that are easy and convenient to use, so that small businesses can thrive.”
– Eyal Shinar, CEO, Fundbox
“A whole new ecosystem of specialized FinTech players has emerged in the past few years to serve consumers where banks have left them behind. FinTech has already proven the impact of applying big data and machine learning on how people get access to and manage their finances. These new technologies give FinTech’s a much better understanding of their customers and allow for context-sensitive product offerings.
As the results of the Blumberg Capital study confirm, consumers overwhelmingly believe FinTech helps people gain more power over their finances and helps democratize financial services. I couldn’t agree more. At Kreditech, our mission is to improve financial freedom for the underbanked through technology. We see enormous opportunity for consumers who are neglected by traditional banks to gain further control over their finances and we’ve built a financial services platform with a proprietary credit scoring technology to meet this need – enabling underbanked consumers to manage their personal finances with full data transparency and customized financial products.”
–Alexander Graubner-Müller, CEO & founder of Kreditech
“FinTech’s have started a revolution by giving consumers and small businesses access to new, cheaper and quicker financial services and products. This is only the tip of the iceberg and it will be exciting to see more disruption and innovation as competition intensifies, new business models develop and partnerships between traditional banks and FinTechs are established.”
– Richard Eldridge, CEO, Lenddo
“The optimism about technology that we see in these results is striking,” said Brock Blake, CEO of Lendio, the nation’s leading marketplace for small business loans. “Alternative finance companies like Lendio were founded to level the playing field and make more financing options available for main street businesses. The fact that three in five Americans have a positive view of FinTech and 74 percent agree that FinTech provides consumers with more power over finances means we’re achieving the goals we set.”
– Brock Blake, CEO, Lendio
“Large credit card companies do not have customer interests at heart, which you see with their unfairly high rates and unnecessary fees. Yet not having a credit card is not practical. That’s why we built SimplyCredit to be the best way to manage all your credit cards in one place, but with lower rates and without fees or penalties. The recent survey from Blumberg Capital reinforces the importance of our mission with the data showing that 72% of Americans agree it would be helpful to have an automated and customized way to ensure they never miss a payment and always minimize the total interest paid.”
– Karthik Sethuraman, co-founder & CEO, SimplyCredit
“As FinTech adoption grows and larger volumes of money are transacted online, FinTech companies are adopting RegTech solutions to meet mandatory financial regulations, such as AML and KYC obligations, while effectively serving their customers across borders and jurisdictions. We’re proud to have three of the top five payment gateways in the industry leveraging our global identity verification platform solutions to help automate processes so they can focus on innovation.”
– Stephen Ufford, CEO, Trulioo
“We are in an especially receptive era for FinTech innovation, with both consumers and businesses looking for new ways to save money and boost the bottom line. I believe that traditional banks will always have their place, but it’s the technology firms that are really pushing the industry forward.”
– Oren Levy, CEO, Zooz
This online survey was conducted by Regina Corso Consulting on behalf of Blumberg Capital between September 6 and 7, 2016 among 2,036 U.S. adults, aged 18 and older. Figures for age, gender, education, income, employment and region were weighted to bring them into line with their actual proportions in the population. Because the sample is based on those who agreed to participate, no estimates of sampling error can be calculated.