By Phin Upham
According to Phin Upham, regulation isn’t killing the banks. What might be the true culprit is the fact that American banks currently ignore 40-60% of the public. Banks are in the business of making money. They are willing to take some risks, as evidenced by the 2007 collapse, but the rules are much tighter now.
The Fed genuinely hoped that banks would use the extra capital they needed to keep on hand as protection from another collapse, and as a safety net so they could lend more money. What happened instead was a bit tighter in the fist and that’s got serious implications for consumer banking now and into the future.
Banks like deals they know they will get paid on, which is why there is an entire subsection of the country that is not serviced by credit or bank accounts. By Phin Upham’s account, that number is close to 40-60%. Over half of Americans aren’t anywhere near getting the financial services most of them will need to elevate their status in life.
That presents a huge opportunity for smaller institutions that are more agile. Big banks can’t invent products that can compete for business at the poor credit level, it would be too costly. Smaller loans from smaller firms represent a smaller risk. These companies help bring the cost of money down, which contributes to a business’ health or a consumer’s budget.
Hopefully, the future will bring more of these smaller fin-tech firms that are willing to build with no inhibitions. Without these crucial lending vehicles, the middle class may face irreparable damage.