Share
As a digital transformation reshapes the financial services industry, consumers increasingly seek easier, affordable and transparent access to investing options. Many novices exclusively explore investing-specific apps, spurred by inconsistent advice from social media.
Capitalizing on this business opportunity should not be left to investing apps alone. Data shows these customers would deepen their relationship with a traditional bank or credit union for a better opportunity to grow their money if the services, content and digital features better replicated what they find from fintech challengers.
Traditional financial institutions of all sizes, including community financial institutions, can stay true to their roots, playing up their unique personalized connection to their customers to help them navigate investing, saving for a home downpayment and general financial well-being.
Scalable savings, budgeting, investing and financial literacy technology solutions can often be add-ons to existing digital features to grow in-house offerings. And this account growth opens potential retail revenue streams in an area of banking where margins have been squeezed in a long run for historically higher interest rates.
According to research conducted by Censuswide and InvestFi digital investing platform, which partners with banks and credit unions, banking customers want in-house digital investing solutions from their primary banking source. A white paper further exploring the results can be downloaded here.
“The financial services industry is undergoing a technological transformation that is reshaping how consumers engage with their finances. A critical aspect of this shift is the rise of digital investing where individuals manage their investments through user-friendly platforms designed to offer convenience, control and affordability,” says Kian Sarreshteh CEO at InvestFi.
“Historically, investing was a service mediated by financial advisors or brokerage firms. Today, digital tools have democratized access to investing, empowering even novice investors to participate in the financial markets with just a smartphone,” he says.
Other key findings from the survey:
Banks and credit unions can play a vital role in boosting customer confidence with money well beyond basic account services. But that requires taking back some influence, by offering sound education, targeted social media marketing and making sure to connect with stakeholders where they transact.
In a separate study from late last year, FIS said its research shows that social media has become the primary source of financial advice for younger generations. For instance, 40% of Gen Z and 36% of Millennials surveyed report that they are learning about finance from social media platforms, whereas less than 25% of this cohort are being educated by their financial institution.
“As reliance on social media for financial guidance grows, a profound challenge for banks emerges as they compete with the immediate gratification offered by influencers,” said Hashim Toussaint, GM of Digital and Open Banking at FIS. “Banks must lean into their role as trusted financial advisors, unlocking the financial wisdom for customers to put their money to work, so they can take a step back from the daily doomscrolling and have greater confidence in their ability to achieve their future goals.”
A particularly striking finding from the study, according to FIS, is that 41% of surveyed Americans believe they could only invest money if they experienced a financial windfall like winning the lottery, and 55% are worried they will never be able to retire. This pervasive financial anxiety suggests that many U.S. consumers may feel their current financial strategies are insufficient for achieving long-term goals like homeownership or substantial investment.
Bank and credit union consideration of investment services crossover comes at the same time that investing platforms are targeting traditional banking for their own growth.
For one, the retail stock investing app Robinhood said its Robinhood Banking will now provide checking and savings accounts with an annual percentage yield of 4% as part of its platform’s Gold service. FDIC insurance is on offer from Robinhood’s tie-up with Coastal Community Bank.
The company is even exploring “cash to your door” delivery through an app similar to Uber’s for its banking customers as an ATM alternative.
Robinhood co-founder and CEO Vlad Tenev told Yahoo Finance that the company wants to be a one-stop destination for people to manage their wealth. Tenev didn’t rule out exploring a bank charter down the line. The company originally explored a charter in 2019 but paused that pursuit at the time, citing costs.
For InvestFi’s Sarreshteh, banks and credit unions should not shy away from leveraging reputation to meet such challengers.
“Trust is one of banks and credit unions’ most significant advantages over external investing apps. These institutions have long-standing relationships with accountholders, who rely on them for security, reliability and stability,” he stressed.
Read more:
5 tech trends to stay on top of wealth management services inside the bank
Rachel Koning Beals is Senior Editor with BAI.
Become a member to unlock exclusive content, connect with industry experts, and gain access to valuable resources. If your employer is an institutional member, activate your ProSight membership benefits with a simple email address.
