This month, we are examining some of the consumer issues that have surfaced with these innovative ways to bank. Technology has revolutionized the way consumers interact with the financial system. Older innovations (such as the internet and mobile devices) and newer developments (such as big data and computer algorithms) have changed banks and what we think of as banking: making deposits, taking out loans and managing investments.
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Just as with banks, there is no single licensing or regulatory agency that oversees fintech companies. Depending on their activities, they can be licensed or supervised by local, state or federal regulators on a functional, or activity-based, basis.
Although many banks have maintained branch operations in the wake of the COVID-19 pandemic, others have cut back significantly, if temporarily, or announced accelerated plans for permanent closures. This has heightened concerns about an ongoing consolidation of branches nationwide, which has reduced their number by 11% from a peak of 92,030 in 2009.1
Branch closures increase the distance people must travel from where they live, shop, work or otherwise prefer to engage in financial transactions. Those affected sometimes have to go without or must drive long distances to access them. Businesses may be forced to close during the workday to make deposits or withdraw cash in distant cities.2 The elderly, people with mobility issues and those without access to transportation may be particularly inconvenienced.
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There is more competition than ever in the provision of banking services, and financial technology (fintech) developments have turbocharged this trend. Traditional commercial banks, thrifts and credit unions are vying with fintech firms and other enterprises for customers or are pairing up with these new competitors to widen offerings, improve speed of service and take advantage of new technologies. Some of these nontraditional providers are specializing in one product or service, or are targeting a very narrow customer base. A number of them are obtaining bank charters, while others are seeking alternative charters.
Proud. Overwhelmed. Frustrated.
These sentiments and others expressed by bankers come from the 2020 National Survey of Community Banks, conducted annually by the Conference of State Bank Supervisors (CSBS) and state banking regulators for the past seven years. The survey is released each year during the annual Community Banking in the 21st Century research and policy conference; the event is sponsored by the Federal Reserve, the CSBS and the Federal Deposit Insurance Corporation. In this year’s survey, the effects of COVID-19 dominated and colored typical industry concerns related to regulatory burden, small business lending, industry consolidation, competition and technological innovation.
Read More about Community Bankers Play a Vital Role in America’s Pandemic Response