Is the banking system finally responding to consumers’ needs and desires?

BY STEVEN KASZAB

It is a sign of the times when vendors announce they now take payment by: cash, Venmo, PayPal, Cash App and Zelle. In 2021, 46.6% of all households were using non-bank online payment services like Venmo, PayPal and Cash App, according to the National Survey of Unbanked and Underbanked Households, a survey carried out by The Federal Insurance Corporation.

Households without bank accounts have been accessing non-bank online payment services to exchange, or even store money directly onto and through each platform. Use of prepaid cards was much higher among unbanked households (32.8%) than among banked households. Unbanked rates were the highest among: lower income households, less-educated households, Black and Hispanic households, working-age households with a disability, and single-mother households.

Underbanked households is where at least one person in a household has at least one bank account, but who over the past year have made use of at least one non-bank alternative financial service like: prepaid debit cards, check cashing, money orders, payday loans, auto title loans and pawn shops.

The survey also took the effects of the pandemic into consideration. Many households opened bank accounts in order to receive direct deposits from new employers or their governments.

The study notes some significant long-term shifts away from non-bank financial services Check cashing fell, while money order use increased, cutting across all different racial or income groups.

There has been an increase in the use of banks possibly due to the new technologies introduced by the banking system and the pandemic. More effective consumer protection, for example, could also be driving consumers adoption of less predatory financial services

Decreasing use of non-banking services, especially through a period of declining unbanked rates, could imply households are fulfilling their financial services within a banking system and benefiting from consumer protections and opportunities within that system.

Is the banking system finally responding to consumers’ needs and desires? How will this affect the massive non-banking system? Legal action within Canada and America are preceding, with challenges to non-banking Service Corporation’s vs. government oversight, as well as the banking system vs. their offshoot business model, the non- bank.