Blog Invest Alternatives to Traditional Banking in 2020

Alternatives to Traditional Banking in 2020

date September 14, 2020 time 4 min read 846 views

The reluctance of traditional banks to improve their services has driven many to seek other options. While it may seem improbable, today there are quite a few alternatives to traditional banking. Each with features like better interest rates, faster transactions, and more flexibility.

From slow transactions to inflated fees and plummeting-interest rates, there’s a lot to dislike about the traditional banking system.

Growing frustration with stale banking has given rise to many alternatives to traditional banking. By creating innovative new ways to transfer, store, lend, and borrow money, these new platforms are giving banks a run for their money. We want to talk about a couple here with you today.

There are many alternatives to traditional banking
There are many alternatives to traditional banking today (source: pxhere.com)

Problems facing traditional banks today

As some of the oldest institutions in the world, the traditional banking system is struggling to adapt to the changing world. With strides in technology making it possible to do more in less time, more people are yearning for a streamlined banking experience. And in many parts of the world that aren’t yet covered by banks, tech platforms are already filling in the gaps.

Problems facing the banking industry today include:

  1. High fees

When people decide to open bank accounts, they usually do so because they want to save money. But with the high fees charged by brick and mortar banks for everything from overdrafts to just maintaining an account, it’s easy to feel like you’re losing money.

  1. Poor customer service

Excellent customer service experience is necessary if you want customers to keep coming back. But many established banks have government backing and not much pressure from competitors to change. It’s hard to compete with an institution that’s insured by the FDIC.

  1. Slow transactions

In a world where you can get a lot done with just a few clicks on your smartphone, slow bank transactions are torturous and extremely frustrating. At some banks today you still need to walk into an office to make a wire transfer! International transfers can sometimes take over a week.

  1. Low-interest rates

People put money in a savings account because they’re hoping to earn some interest while they keep their money for a rainy day. In the 1980s we were making returns of over 8%/ Now interest rates are so low that most banks don’t offer more than 1.5% interest. This is lower than the current rate of inflation.

Alternatives to traditional banking

With traditional banks becoming out of their depth in a technologically advanced world, people continue to search for better options that are more in tune with today’s standards. Some alternatives to traditional banking include:

Peer-to-peer (P2P) lending platforms

While they lack the insurance backing of traditional banks, P2P lending platforms seek to bring the interest rates banks used to give back to customers like you.

Peer to peer (P2P) Lending is one of the alternatives to traditional banking
Peer to peer (P2P) Lending is one of the alternatives to traditional banking

They do this by providing the same service as banks: they source loans to borrowers from investor money. P2P platforms process loans and pay borrowers faster than the traditional banks often at much lower rates

As a lender on a P2P platform, you can choose to invest in either individual P2P loans at a higher interest rate or invest in a lending pool model for safer, more consistent gains. Interest from P2P lending is significantly better than bank interest because the platform takes a much smaller cut.

Some of the better known P2P platforms include Peerform, LendingClub, Upstart, and MyConstant

Online banking

Branchless digital banks have made a huge surge in the late 2010s. With easy account creation processes and fewer fees, they’ve become a much more efficient way for the average person to manage their money.

Often customers have access to similar services to banks like Visa debit cards, photo-based check deposits, and direct deposits. They also usually include other features like instant transfers to internal accounts and support for payment services like Paypal, Square, and Venmo.

Because online banks don’t have physical branches things can become a bit more difficult if you want to withdraw cash or transfer to other banks. You’ll find yourself paying a lot of extra fees on ATM trips.

However, many will try to make it worth your while with higher yields for your savings than your local account. You also won’t need to pay monthly fees, maintenance, or overdraft making it a great alternative to traditional bank accounts. 

Two popular online banks in the US are Simple and Chime.

Cryptocurrency

Finally, those fed up with traditional finance, in general, have a new place to turn to – Cryptocurrency.

You can store crypto easily away in e-wallets where they can’t be regulated or confiscated by the government. Because cryptos are not controlled by a central entity, you can trade, transfer, and spend them however you want with only minor fees.

With many merchants now accepting cryptocurrency, more people are buying into the idea of crypto banking. It also helps that crypto ATMs are available in major cities across the world and there are more ways than ever to earn interest on your holdings.

At MyConstant, get up to 9% APY and easy transfers for your savings and crypto

Get up to 9% APY for your saving with MyConstant
Get up to 9% APY for your saving with MyConstant

MyConstant is a P2P lending platform that lets you save, borrow, and invest with USD or crypto all in one place. With MyConstant, you can:

  • Invest: Lending with MyConstant is backed by a buyback guarantee or borrower collateral to give you the best investment security you can get anywhere.
  • Borrow: You can borrow from MyConstant without any credit checks. All you need is cryptocurrency collateral and you can get the amount you’re looking to borrow in no time. Also, loan rates are much lower compared to what traditional banks offer.
  • Flex: Our Flex account offers interest rates 50x higher than in a traditional savings account. You can also deposit as much or little as you want and withdraw whenever you want with no extra fees.

If you’re still keeping your money in a traditional bank account, you’re missing out on a world of new features. See how you could be doing more with your money on MyConstant today.

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George Schooling

George Schooling

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