The lines between financial institutions and other businesses are blurring across the globe. The devil is in the fine print, but do consumers care?
“90 percent of adults in developing countries store money at home, with friends, or with a local co-op,” says Newsweek, but a new option has emerged. “Hybrid” banking services – located “inside convenience and retail stores that already cater to the rural poor” are snagging market share not just in underserved international markets, but on the home front as well.
“[U.S] retailers are mainstreaming a $320 billion industry of alternative financial services that has long operated in the shadow of the formal banking system and under the radar of federal regulators,” explains The Washington Post, with mass retailers like Wal-Mart, Kmart, and Best Buy dominating the mix.
One driver fueling this market is consumer feelings of neglect. “73% of banks are aware that unbanked and under banked populations exist in their market areas, but less than 18% identify expanding services to these groups as a priority in their business strategy,” says the FDIC.
Another factor is eroded trust, piqued by regulatory changes to the banking market. “Demand for alternative services is only expected to grow as strict new rules force banks to charge higher fees for checking accounts, placing them out of reach of many financially strapped households,” advises the Post.
Only 26% of Americans trust the nation’s financial system and less than half say they trust the banking system, according to a recent survey. Because of distrust, consumers are warming to the idea of accepting predatory fees upfront, rather than face the perceived threat of “unknown” or surprise fees at their financial institution. Third party solutions offer consumers a false feeling of control over one’s financial choices - and of minimized personnel risk in a financial environment gone topsy turvy.
Credit unions have worked long and hard to create an environment of satisfaction for their membership that triumphs other financial services. But the battle for trust is equally crucial, and never ending. Honest communication and transparency will need to be constantly reaffirmed as the cooperative industry works to keep member financial services in-house and off the grocery list.