Are FinTechs doing enough to ensure secure transactions and responsive support?

By Puja Sharma

FinTechs should have the same high customer service and regulatory compliance standards as Credit Unions and Banks.

Recent Consumer Financial Protection Bureau (CFPB) data has revealed a concerning trend. In 2023, the CFPB received over 1,348,200 complaints, a significant portion of which were related to FinTech. These consumer complaints not only point to potential risk management issues but also expose vulnerabilities in specific products, services, functions, or vendors. This raises serious questions about the accountability of FinTech compared to the more regulated banks and credit unions.

With younger generations opting for more innovative and easy-to-access solutions to manage their finances, FinTech companies continue to change how finances are managed. FinTechs are often preferred as they offer quicker solutions for payments and investments than traditional financial institutions. However, greater accountability is required for FinTechs as they fail to meet the high standards expected in the financial sector. 

According to InvestiFi, a provider of investing solutions for financial institutions and their account holders, community financial institutions must provide users with the right tools to save them from relying on less reliable FinTechs.to manage their finances.

James Hutchison, Head of Sales and Business Development at InvestiFi, commented, “Traditional banks and credit unions face strict regulations and customer service standards while many FinTechs operate in a regulatory grey area. FinTechs provide delightful and frictionless experiences to consumers until something goes wrong. Consumers at FinTechs frequently find themselves locked out of their accounts, unable to access their funds and often struggle to get timely and effective customer support from FinTechs. 

“Payment apps such as CashApp or Robinhood, popular with younger customers, have faced numerous complaints regarding access to accounts, transaction disputes and customer service and support. Many rely on these platforms for their small businesses or primary banking needs, and such issues could have severe financial consequences.”

While the CFPB can often resolve such issues, many individuals need to be made aware of the CFPB or lack the knowledge to navigate financial disputes. Complex customer service scenarios must be addressed, and industry-wide improvement must enable this change.

“FinTechs lack accountability and must therefore align their practices with established banking regulations and provide clear guidelines for customers by investing in accessible customer support systems”, added Hutchison, “This will not only benefit consumers but will also strengthen the long-term success and trustworthiness of FinTech platforms.

“Community financial institutions, especially credit unions, owe it to their members and account holders to provide safe and secure financial services, backed up by well-regulated adults instead of well-funded kids. Credit unions must adapt to customer demands for online experience and re-engage unsatisfied customers of FinTechs who fail to protect them.

“While FinTechs provide quick and easy access to payments, loans, and investments, they frequently fail to support their customers accordingly. Credit unions must evolve their delivery infrastructure, provide additional financial services and ensure members are well-educated and equipped to make investment decisions to increase the financial security of their members,” concluded Hutchison.