For decades, banks have not been delivering.
Rather than delivering value, they’ve been extracting value from their customers. Rather than spending on innovation, they’ve been spending on marketing. Rather than building relationships with customers, they’ve focused on making profits for their shareholders. The big banks are not aligned with consumers’ interests, and yet we are all too happy to give them our money.
In this article, we aim to explain the problem with how big banks treat customers, and how we’re doing things differently at Unifimoney.
The largest four US banks (JPMorgan Chase, Bank of America, Wells Fargo, and Citigroup) spend over $10 billion per year on marketing and have a total of $9.1 trillion in assets. Yet they offer some of the least intuitive, consumer-centric products on the market.
With over $12 trillion in checking and savings accounts, these banks hold a lot of their customers’ money — but offer no interest at all. In fact, they have been ripping consumers off at over $300 billion per year. When you deposit your money in a bank, the money doesn’t return to you. Instead, the money goes to profits and to the pockets of the banks’ shareholders. There is no good reason why banks cannot pay 1.5% in interest rates — as we’ll see below, we are essentially giving them free money.
To the rich, the banks pay hardly any interest rates. To the poor, the banks ravage them with high fees and exorbitant APYs. No one wins except the bank.
As a surveyor said in Nonfiction Research’s report on the Secret Financial Lives of Americans, banks are:
“Not much better than a mattress.”
As mentioned above, the big 4 spend billions of dollars on marketing to the consumer. In fact, JPMorgan Chase spent $2.51 billion on advertising in 2018 — far more than what Big Tech companies such as Apple and Netflix spend. They spend billions on marketing because it’s the only way to distinguish themselves from their competitors. They rely on marketing in order to get ahead of the competition, rather than innovation.
This is why Americans are still using checkbooks, waiting days to complete a bank transfer and need to go in-branch to open an account. With the money going to marketing, banks don’t focus on technological innovation. Instead, they build apps, create fancy coffee shops, and hire a “Head of Digital” — but digital transformation is not a “project” that starts and ends with an app. Digital should be a core part of the banking model and customer experience.
This focus on marketing means that banks are focused on extracting as much from the customer as they can, rather than offering a good product.
We’re all used to free banking: an account to put your money that doesn’t charge you fees. But if banking is free, how do banks make so much money? It’s simple: when you deposit $1,000 in your current account, the bank essentially borrows this money at the lowest interest rate possible (you probably receive something like 0.025%). It then loans out this money to others at an exorbitant 20% APY. As consumers, we are essentially giving them our money for free. Your money becomes their profit.
As if this wasn’t enough, big banks love to add hidden fees and charge you when you least expect it. In fact, many of these fees are optional — if you asked, you wouldn’t need to pay for them.
But because it’s “free banking”, consumers are supposed to be grateful, and since we already have pretty low expectations from banks, we don’t say much. The banks make huge profits from our hard-earned money and thank us by offering an account “for free” along with abysmal interest rates. Eventually, one realizes that we’re getting a bad deal here.
With all this money the banks are making, one would hope that they could at least personalize their products and services. And yet, as any customer of one of the Big 4 can attest, the product is far from personalized. Mortgage transactions are overly complex, payments are full of obstacles, and loyalty is not at all rewarded.
According to our **Unifimoney survey, almost 50% of affluent millennials have over 5 financial apps and more than 25% spend over 3 hours per week managing their money. This is because banks have made money management purposefully complex: the more fragmented the market, the more likely you are to be confused by what’s happening to your money. Banks profit off your financial ignorance. As a consumer, your money is not working for you when it’s in a bank account.
According to Nonfiction’s report, Americans need personalized financial services to help with activities such as salary negotiation, budgeting, and managing debt. They need a personal CFO and a bank they can trust. But banks look the other way because they know they “have to torture people pretty hard before they leave a bank”.
We built Unifimoney because we’re sick of the way banks treat us and how they get away with everything from illegal activities to hidden fees. We’re sick of banks making huge profits off of our financial ignorance and offering unintuitive products. We’re sick of getting bad value for money. Here are a few ways we’re doing things differently at Unifimoney:
We don’t want consumers using ten different apps just to manage their money efficiently. We don’t want our users’ money to line the pockets of shareholders and make huge profits for the banks. That’s why we’re building a bank that holds everything in one: a checking account, an investment account, a debit card, a credit card, and more. With a Unifimoney account, you won’t need to download an additional app to invest in stocks or manage your debt.
Forget about huge executive salaries, fancy private jets, and over-the-top marketing ads. Instead, we deliver value straight back to our users. Our technology helps us keep our costs low which allows us to give back to users in the form of higher interest rates. We’ll also be offering real Demand Deposit Accounts (not virtual ones) which means we can offer the same features as a traditional big bank (yes, even old-school checkbooks).
Because our technology costs are so low (and we have no physical branches), we can focus on giving back over 90% of the money we’ve earned to our customers. All your cashback will be auto-invested straight back into your investment account — no need to move your money around to get the best interest rate.
To us, technology is not just there to reduce costs — it’s also there to completely reinvent the product. Airbnb didn’t copy hotels, Amazon did not copy bookstores and Uber did not copy taxis. Technology is not a “project” or a “feature”. With technology, we aim to completely rethink the way that banking is done.
Although we are an app, we don’t consider ourselves an app company. We are a high-functioning utility that delivers on its promises. We listen to what our customers need and develop the product accordingly.
Banks spend so much money on marketing because it’s the only way to stand out: when all the products offer poor value and not much else, the only way to win is by outspending. With Unifimoney, we outsmart competition with a good product. Many new banks call themselves tech companies but simply offer “faster horses” — apps with sleek designs, cool logos, and fast page speed. But this is not real product innovation and does not transform the way we bank. With Unifimoney we build cars, not faster horses.
With Unifimoney, you’re not the product. That means we don’t use your money to make profits or to lend to others. We focus on offering a product that is good value for money, acts upon customer feedback, and focuses on product innovation. If you are as sick of the banks’ business model as we are and want a bank that acts in your best interest, you’ve got a place with Unifimoney.
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The above does NOT constitute an offer, solicitation of an offer, nor advice to buy or sell specific securities. The opinions listed above are not the opinions of Unifimoney Inc. or Unifimoney RIA, Inc. but represent the opinions of independent contributors. These contributors may or may not hold positions in the stocks discussed. Investors should always independently research any stocks listed and form their own opinions, while recognizing that any investments made may lose value, are not bank guaranteed and are not FDIC insured.