Yahoo Finance Here’s How Americans Bank in 2024: Do Experts Think We’re Doing It Right?
According to Forbes, America is home to 4,706 FDIC-insured banks, including 579 savings institutions and 4,127 commercial banks — and just 6% of the country is classified as “unbanked.” That means 94% of America’s 131.43 million households have at least one member with a bank account.
Few industries affect more people, play a bigger role in their daily lives or are responsible for protecting more of America’s personal and national wealth. According to Statista, U.S. banks safeguard $30.35 trillion worth of the country’s assets.
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A new GOBankingRates study of more than 1,000 adults examined how Americans interact with the country’s powerful and sprawling banking system, what they need from it, what they think it’s lacking and which services and features they care about most.
The study, along with expert analysis of its results, reveals an industry that’s rapidly changing to compete for customers and meet their evolving needs — and mostly doing a good job.
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Despite Intense Consolidation, Americans Still Have Options
America is a land of big banks.
According to Statista, four giants — JPMorgan Chase, Citigroup, Wells Fargo and Bank of America — dominate the U.S. banking industry. Visual Capitalist says the country’s 100 largest banks hold $18.8 trillion in assets, with the top five holding more than half that amount in their vaults — the No. 1 and No. 2 biggest alone account for 30%.
But despite relentless consolidation by global juggernauts, Americans still have plenty of options.
“The U.S. banking system showcases a diversified landscape with a mix of local banks, regional banks, big banks, and credit unions, fostering healthy competition and financial accessibility for consumers,” said Michael Ashley, a banking expert and founder of the personal finance site Richiest.com.
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When Given a Choice, Consumers Choose What Works for Them
Ashley was the director, business manager and chief of staff at UBS, a global investment bank and financial services firm with a presence in 50 countries. He also served as business analytics and business initiatives manager for Wells Fargo, and chief of staff to the Citi treasurer and Citi Treasury COO. In 2023, he founded Ashley Insights, a consulting firm that deals with internal strategy, IT project management and business integration for the financial services industry.
He thinks the fact that customers have so many choices speaks highly of the industry’s health.
“While large banks offer extensive services and technological advancements, local banks and credit unions contribute to community-focused banking,” he said.
The GOBankingRates study found that one in three people choose big, national banks while roughly one in five do their banking with online institutions. Around 18% stay close to home with a local bank, 15% choose a credit union and 12% go with regional banks.
All in all, the blend seems to give people the choices they want and need. A large majority — 65% — have no interest in switching banks and 77% say they’re satisfied with their current institution.
Many Missed Out on Once-in-a-Generation APYs
For anyone under roughly the age of 40, today’s interest rates are the highest they’ve ever seen in their entire banking lives. America hasn’t experienced 5%-plus savings APYs since the turn of the 21st century.
“Interest rates and yields in the U.S. have been reasonably competitive, encouraging savings and investments,” said Ashley.
Even so, the GOBankingRates study found that while 88% of people have a checking account and nearly three in four have a standard savings account, fewer than 10% have a high-yield savings account.
Global professional services firm Deloitte joins many industry leaders in predicting interest rates will fall in 2024, meaning nine out of 10 savers let a golden opportunity slip away and may have missed their best chance to grow their deposits.
The People’s Voices Have Been Heard: Fees Are Consumer Kryptonite
The greatest achievement of American banking consumers in the post-pandemic era was to force the hand of fee-hungry banks. When fee-free online institutions provided alternatives, the public began making it clear they would take their business elsewhere if their banks continued charging junk fees or making them pay to manage their money.
The GOBankingRates study confirmed that sentiment, with more than 41% — the largest plurality by a mile — citing low fees as the most important consideration when opening a new account.
By and large, the pressure campaign worked.
According to American Banker, a “trickle” of banks began reducing or eliminating fees in 2021 in response to intense customer pushback. In 2022, the publication said it “became a flood.”
People also spoke with their votes, and the Biden Administration and Consumer Financial Protection Bureau (CFPB) spent much of 2023 pressuring banks to reduce or eliminate reviled junk fees like charges for overdrafts and insufficient funds. The industry mostly conceded, and the CFPB expects consumers to save $2 billion annually as fee-based profits dry up.
However, some banks are still clinging to the loathed fee-based profit system and continue to hit customers with maintenance fees and other miscellaneous charges.
“Concerns arise over fees and minimum account balances, where some institutions may fall short in providing customer-friendly terms,” said Ashley.
Digital Banking Is the New Banking
When asked about their preferred banking method, 54% of the GOBankingRates survey respondents said mobile apps and 24% said online through a web browser, leaving just 22% opting for a physical branch or ATM.
In its 2023 Global Banking Annual Review, the worldwide management consulting firm McKinsey & Company called the current state of affairs “the great banking transition.” The firm suggested five priorities for financial institutions — and No. 1 was “exploiting leading technologies (including AI)” to satisfy the growing desire for robust digital and mobile offerings, which the GOBankingRates study reflected.
Ashley thinks the industry is on the right path to meet evolving customer demands in the digital age.
“The integration of online and app-based features is commendable, reflecting the industry’s adaptability,” he said. “The inclusion of crypto and brokerage accounts reflects a forward-thinking approach, though it demands careful regulatory considerations.”
Old-School Banking Endures in the New World
While nearly four out of five respondents prefer mobile or online banking, don’t assume consumers are ready to scrap traditional features and services just yet. More than half of the study’s respondents had either not considered using an app-only neobank — like Chime, Current and Dave — or had simply never heard of them. Over half had written at least a few physical checks in the last year, and 57% had visited their local branch within the last month or a couple of months. Less than 5% said their bank was online only.
On top of physical check-writing and branch access, the public also still insists on easy access to ATMs. Here, too, Ashley thinks the industry has mostly done well to appease the banking public’s desire for strong digital offerings without eliminating key services associated with traditional physical banking.
“The ATM network availability is generally robust, ensuring convenient access for customers across the country,” he said. “Branch access and customer service vary, with larger banks emphasizing digital services, potentially impacting personal interactions.”
Security and Trust: 2 Things That Never Go out of Style
Overall, Ashley concludes that the banking industry has mostly succeeded in anticipating, understanding and meeting their customers’ rapidly evolving needs and expectations. The two most crucial subjects raised by the GOBankingRates study — trust and security — largely confirm his analysis.
More than one in four said they “completely trust” their bank to act in their best interest, with another 29% saying they have “a lot of trust” in the same. Another 29% said they “somewhat trust” their bank, leaving only single-digit percentages who have “very little trust” or “don’t trust” their bank to put them first.
When it comes to faith in their bank’s ability to safeguard their private information, the results were even better, with nearly two out of three completely trusting or having a lot of trust in their institution. Another 25% somewhat trust their bank, leaving only a negligible minority of naysayers.
That, above nearly everything else, tells the tale of an industry where healthy competition has nurtured policies that put the customer first.
“Stability, security, and public trust remain strengths, buttressed by regulatory frameworks,” said Ashely. “Addressing fee structures and enhancing customer-centric services could further refine the U.S. banking model for the future.”
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This article originally appeared on GOBankingRates.com: Here’s How Americans Bank in 2024: Do Experts Think We’re Doing It Right?
