Trust is an important cornerstone of any relationship. It’s no different when it comes to finances. After the market crash of 2008, public trust began shifting away from traditional banks and turning toward alternative banking, including fintech banking, prepaid debit cards, and more.
It’s now been over 10 years since the 2008 recession, and after weathering the financial storm of COVID-19, even more people are making the switch to alternative banking. This time, they’re accompanied by financial professionals eager to see change in a stagnant industry.
In this article, we’ll explore how alternative banking has risen to prominence within the financial industry itself and what changes are being made to ensure safer, more accessible alternative banking options.
The Start of Change
The fintech industry looks back fondly on the market crash of 2008, an event that allowed Silicon Valley tech startups their chance to gain public trust, thereby taking over the finance scene. Traditional banks, on the other hand, still seem either unable or unwilling to make the structural changes needed to retain their customer base.
Banks want consumers to trust them wholeheartedly — but how, when they have a history of systematically discriminating against women, people of color, and other minorities? The younger generation is wary of exclusionary financial regulations, which is why they’re increasingly turning to alternative banking methods.
A Network of Professional Advocates
The rise in cryptocurrency, changing lending practices, and neo banks (banks that operate through digital means only) have been fed in part by professional endorsement. Not all financial professionals have their stakes in traditional banking. Trading applications like Robinhood, robo-advisors, and online brokers all stand to benefit from alternative banking.
Financial advisors and professional accountants work to advise clients on financial decisions. With no incentives to encourage clients in the way of traditional banking, many are beginning to recommend alternative banking options. Whether these alternatives help individuals secure more favorable interest rates on loans or simply establish a more sensible banking ecosystem, financial professionals across the board are beginning to endorse alternative options.
In fact, some financial advisors specialize in alternative banking. After spending years in school, and managing their own finances and those of clients, professionals can share the wisdom they’ve accumulated on the road to becoming an accountant or advisor. These professionals play a crucial role in spreading useful, well-researched information to their clientele.
Establishing a Global Benchmark for Data Security
Of course, alternative banking is no walk in the park when it comes to security measures. As with any digital innovation, cybersecurity concerns still run rampant but are slowly being addressed by governments and private enterprises.
Mobile banking applications, for instance, are a customer-facing convenience that the majority of Americans take advantage of. It’s estimated that in 2020, over 85% of Americans used a mobile device to check their bank balance.
Securing mobile banking apps from security breaches has the potential to significantly reduce user risk. Studies are still underway, but current best practices in mobile app security call for encryption, security algorithms, multi-factor authentication, and thorough reverse engineering. Nonetheless, mobile banking is still more secure than standard online banking because user data is stored in a secure data center rather than locally on your device.
However, if we are to move toward a globally digital world, standardized international data security measures must be adopted. Such measures would be adopted across international borders while respecting the regulations of each nation. Current global data security laws include the Payment Card Industry (PCI) Data Security Standard, which protects branded credit cards by requiring secure network maintenance, routine security tests, and more.
While no laws currently apply to global data security as a whole, PCI is an example of widescale regulation in action. Several initiatives have also been proposed in front of the U.S. Congress, including the Data Security and Breach Notification Act and the Cyber Privacy Fortification Act.
As these options are considered by lawmakers and finance professionals alike, they offer an opportunity for the public to learn more about alternative banking. Ever-advancing security measures are key to building trust in alternative banking for finance professionals and laypeople alike.
Agility is the Key to Success in Business
“The times change, and if you don’t change with them, you’ll get left behind.” The words of English actor Bradley Walsh shed a light on the future of banking — the future of finance is agile in every possible way.
That doesn’t mean there aren’t risks involved with changing methodologies. But where the risk is high, the reward is higher: agile finance can lead to extreme increases in productivity, product quality, and employee and customer satisfaction. In the future, decentralized finance apps could even replace banks and lenders, a shift that would completely redefine the finance industry.
Although significant regulatory and cybersecurity barriers still stand in the way of widespread alternative banking adoption, that hasn’t stopped Americans from diving in full force. The alternative banking data revolution is well underway for both users and financial professionals. Only one question remains: how long until traditional banks fall by the wayside?