Over the past few weeks, you may have heard a lot in the news about cryptocurrency, NFTs, blockchain technology, and just about every digital financial instrument in between. In line with those trends, CivicScience took a look at the consumer mindset regarding these cutting-edge fin-techs (take a look at our studies into crypto, digital wallets, and NFTs for the latest).
The interesting thing about the growing awareness of and demand for investment opportunities like cryptocurrencies and NFTs is that they largely exist outside traditional banking structures. It turns out that overall trust in banks and financial institutions to protect assets may not be that strong.
A higher proportion of respondents have low or no trust (24%) in banks than those that have high levels (22%) of trust. Across income, those with the highest incomes tend to trust banks the most, but they also have similar levels of low trust as other income groups.
And if you’re curious how this trust spreads across age, you probably won’t be surprised by the results.
Those aged 25 to 34 report the lowest levels of trust in financial institutions, followed closely by Gen Zers below them. The long-term effects of the Recession of the late 2000s may be playing a part in this overall lack of trust within this age demographic.
Sixty-nine percent of the general population has had about the same level of trust in banks since the Recession, with another quarter (25%) reporting a decrease in trust since then (keep in mind there have been at least two large-scale economic booms since this time).
This mounting distrust in banks represents a growth opportunity for financial institutions. Rather than focus on online products and mobile offerings (which our previous research shows have little effect on winning over new consumers), banks could potentially work on building more trust with their customers.
Again a point of note, when looking at trust since the Recession across income and age, we see the same numbers from our look at cryptocurrency.
Which is all to say, that distrust in banks (and interest in cryptocurrency) lies most prominently among the wealthy (those with the most purchasing power) and the young.
So There Must Be Trust in Digital Solutions, Right?
The surprising answer is no, not really.
In large part, the majority of the general population trusts banks more than some new digital wallets and online financial offerings (although trust hasn’t changed much over the last three years). This may be simply because banks are what people are used to, or the threat of funds being “hacked” feels more real with digital solutions.
While similar to familiarity with crypto, trust in digital solutions, or at least a lack of distrust, is found among the young, who seem to have no strong opinion about which is more trustworthy, traditional banks or digital solutions. Those 55 and older, however, trust traditional banks far more than other age groups.
Interestingly, one of the primary reasons people buy and invest in cryptocurrency is its ability to protect funds from theft or counterfeit, due to its blockchain technology. The problem, however, is that many cryptocurrency funds are stored in digital wallets, which can be just as “hackable” as any other financial instrument.
And as you can see, trust in tech companies’ ability to protect customers’ financial assets is even lower than that of banks — a trend that is strongest among the lowest earners, but followed by the highest.
Interestingly, while trust in institutions and banks to protect financial assets increased (albeit only marginally) as age increased, trust in tech companies to do the same stays relatively flat across age demographics (although highest levels of trust are prevalent among the youngest groups).
So even though people across all demographics don’t trust banks, tech companies are even less trusted when it comes to protecting financial assets.
So What Do We Have?
Well, a bunch of people who don’t trust anyone to protect their money. Right now, nearly one-fifth (19%) of the general population is at least somewhat interested in non-bank fin-tech alternatives.
CivicScience will keep a pulse on this number over the course of 2021, as tech like cryptocurrency, NFTs, and other altbanks, neo banks, and challenger banks become more and more mainstream.