Major banks such as Wells Fargo are struggling to deal with a rapid decline in their user and consumer base. One major factor behind the dwindling performance of banks is the disconnection with millennials. The vast majority of young adults and new generation users have lost trust in banks and are searching for new alternatives such as bitcoin.
In December, a group of researchers and analysts from Facebook released a study entitled “Millennials + money: The unfiltered journey” to evaluate the connection between banks and the growing population of millennials. In their study, Facebook researchers discovered that 92 percent of millennials have lost trust in bank services and plan on utilizing innovative and non-bank alternatives in the near future, which include bitcoin and fintech services.
The study read:
“To start, Millennials want to feel understood. And it matters because Millennials are 1.4X more likely than Gen Xers/Boomers to switch financial institutions. 45% of Millennials say they would switch banks, credit cards or brokerage accounts if a better option came along.”
A large part of the decreasing popularity of banks amongst millennials can be accredited to the exploitation of fraudulent services of leading financial institutions and the inability of banks to adapt to new and efficient technologies. Millennials are frustrated with the inefficient services offered by banks which are based on the same IT infrastructure and systems developed decades ago.
New infrastructure providers including Alibaba’s Ant Financial–a Chinese financial company that operates the US$60 billion fintech app Alipay–are meeting the demands and necessities of new generation users with innovative solutions to payments.
More to that, over the past few years, the world’s leading banks have been fined and penalized for offering fraudulent financial services. Just four months ago, Europe’s largest banks Deutsche Bank and Credit Suisse were fined by the US authorities for their illegitimate mortgage-backed instruments and other illicit activities. The fines of banks including Barclays and JPMorgan were valued at billions of dollars, with Deutsche Bank alone settling for a $7.2 billion penalty.
All of these factors ultimately contributed to the decline of banks and interrupted the trust-based relationship banks and consumers have maintained for a long period of time. The emergence of true competitors such as Alipay and Bitcoin are pressuring banks and financial service providers and most importantly, leading to the decline of their user base.
According to CNN Money, Wells Fargo credit card applications plunged by 55 percent in February, marking the sharpest drop in applications since the September scandal in which Wells Fargo employees and officials were exploited for creating fake accounts. In addition, Wells Fargo stated that the bank account opening rate has reduced 43 percent since last year, alarming investors and stakeholders of Wells Fargo.
As a temporary solution, Wells Fargo decided to shut down more than 400 branches by the end of 2018. This decision was made by the company’s officials to decrease expenses and operating costs in the mid-term to provide the bank with a recovery period.
Previously, banks and financial service providers manipulated and controlled the global financial ecosystem to the direction they perceived as fit and users had no other choice but to comply due to the lack of infrastructure and service providers outside the realm of banks.
The birth of bitcoin and the introduction of the fintech industry is creating a whole new market for both new users (millennials) and existing users that hope to utilize more efficient, secure and transparent services based on emerging technologies that are improving at an exponential rate.
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Last modified: May 21, 2020 10:00 AM UTC