Back in the day, you had two choices for banking: a big bank or a credit union. But now? Fintechs—techie companies that bring financial services to your phone or computer—are everywhere! So, are they making banking better?
Well… sort of.
Some recent events are forcing changes in the fintech/banking space, and this will have a major impact on customers who use them, so let’s take a look!
Here are Five Fast Facts on fintech’s impending challenges:
- 👀 Where We’ve Come From - Fintechs might look like banks, but they’re not. They have to buddy up with real banks to offer “banking” services. They’re basically middlemen, bringing banks to your fingertips. Banking-as-a-service! (Now, if only someone could make vacation-as-a-service.)
- 🔍 Not Really a Bank - Since they aren’t actual banks, fintechs don’t have the same strict rules to follow. This saves money but can make things messy. They don’t always check customers closely (which can let in some bad apples). And, if a fintech flops, customers aren’t covered by FDIC insurance like bank customers are. Remember when Synapse collapsed?
- ‼️ One Big Pile of Money - One issue is that fintechs keep all their customers’ money in one massive account with their partner bank. Ideally, they track who owns what, but it doesn’t always work that smoothly—keeping records is pricey!
- ✔️Board Approved - In September, the FDIC decided that banks must check fintech customers just as carefully as their own. Fintechs that skip this step might find themselves without a bank partner pretty soon. And, if you’re using one of these fintechs, you still won’t have FDIC insurance!
- 🤔 What’s Next - Fintechs have made banking more accessible and pushed banks to be better. They’re probably not going anywhere, but we’re likely in for a rocky patch as some fintechs struggle or go under. But the solid ones could come out stronger, with safer partnerships that really help customers.
🔥Bottom line: If you’re a customer of a fintech, it would probably be good to think about moving your business to a bank or credit union, or at least start asking some pointed questions. If the industry does go through a period of turmoil, it could make things interesting for a while, but hopefully in the end fintechs will be less a fad and more of a real industry.
Do you use a fintech?
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