Americans are Losing Trust in Banks
A recent Gallup Poll survey revealed that only 28 percent of Americans have confidence in banks, down from the previous level of 40%. In fact, according to the survey, they have more trust in the financial capabilities of tech companies than in the traditional banking industry. Amazon, PayPal, Apple and Google all outrank banks when it comes to trust, even when compared with some of what would be considered the major banking institutions in America.
These findings are supported by a Statista survey that consumers’ trust level in the leading banking institutions, such as Wells Fargo, JP Morgan and Citibank is hovering between 36-44%, whereas technology firms were garnering between 57-73% on the trust meter. An American Express survey conducted this winter found that among millennials as much as 67% say they avoid banks, preferring to stash their cash in a safe or other hiding place.
The Gallup poll was conducted between June 2-7, 2015 and surveyed respondents’ trust in a wide range of American institutions, from the military, federal government to public schools, including financial institutions. The truth is that across the board, Americans expressed declining trust in all traditional institutions.
What Has Happened?
In a March 12, 2015 Inquisitor article, it was reported that only 43% of Americans trusted banks enough to maintain savings accounts there. The flattened economy, pitifully low rates of return on savings accounts and other investment instruments has made them a poor choice for those seeking financial security. Even though the economy has improved, there is a spreading anticipation of some economic calamity on the horizon. In light of the Federal Reserve’s new policy that in the event of an economic crisis, personal accounts can be frozen in order to preserve the banks, more and more Americans are looking for alternative institutions with which to conduct their financial business.
This trend away from banks has impacted not only savings and investments, but also borrowing and commercial transactions. With the growth of e-commerce and its related computer apps, more and more consumers are using smart shopping technologies to handle all of their shopping and purchasing tasks. With the vast majority of consumers hooked to their smart phones or tablets, the idea of being able to conduct all of their financial transactions through the internet is increasingly appealing.
Alternative Lending Markets Stepping In
Today’s internet savvy consumers are also turning to alternative lending markets such as crowdsourcing and marketplace lending platforms (also known as peer-to-peer lending) for their fundraising needs. In fact peer-to-peer lenders, who use online platforms that quickly match borrowers with lenders is experiencing tremendous growth not only in the United States but throughout the world. As people turn away from the banks for their borrowing needs, the volume of peer to peer loans is mushrooming. According to a new report from BI Intelligence, peer-to-peer lenders in the United States produced $6.6 billion in loans last year.
It remains to be seen whether banks will be able to bounce back and regain the consumer confidence that they have lost. But, even so, when it comes to borrowing and investing, consumers have already turned the corner and it will be very difficult to recapture this market from the alternative lending industry.
