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FinTech 101: What is a Green Bank?

What Is a Green Bank?
You may have heard the term “Green Bank” and wondered what it meant. This short article will explain the term and concept behind it.

Green Banks in a Nutshell
A green bank is a bank that exists for the sole purpose of battling earth climate change by funding projects that may be able to decrease the global carbon emissions and increase the use of alternative and renewable fuels and energy. They tend to support infrastructure spending in wind, solar, and other renewable energy space.

Green Banks: Functional Model
Green banks are not climate charities. Their funding is expected to be paid back with a profit for the bank. Currently, they are supported by some states in the U.S. and also by private funding. Green Banks utilize philanthropic and public funds. They generally fund energy projects that beyond the research stage and “good to go”. The Coalition for Green Capital (CGC) is a nonprofit agency that is deeply involved in advocating for green banks’ continued development.

Where Did the Idea for Green Banks Originate?
The idea for green banks started in 2008 when two entrepreneurial-minded, Ken Berlin and Reed Hundt, came up with the concept as part of the Obama transition team’s plans for promoting cleaner energy changes in US society. A proposal to enact federally supported green banks was attached to the American Clean Energy and Security Act. The concept never made it as legislation at the federal level. Green bank supporters were not daunted. Consequently, green bank advocates persuaded some states to take up the cause.

Green Banks: Some Statics
Currently, there are at least ten states that have at least one green bank. In addition, they are in the early stages of catching on globally as well. They also exist in Australia, the United Kingdom, and Malaysia. Within the U.S., green banks have already been involved in the funneling of some $3 billion in funds for clean-energy projects.

Green Banks: Their Future Development
With the advent of the Biden presidency, green banks may again find a firmer footing at the federal level. Indeed, in December 2020, Mr. Biden proposed the idea of a national green bank. They appear sure to gain more traction internationally as the desire to dampen climate change takes hold.

The Push for More Online-Only Banking

The Push for More Online-Only Banking

While it is a fact that some people will always prefer a brick and mortar service to manage their banking needs, it is also true that more and more people are choosing online banking as a more viable alternative. For many, the benefits of online banking result in customers being split between banking with institutions that offer online banking along with brick and mortar services but also turning to banks that operate entirely without a physical location. If you are unsure about whether the benefits of online-only banks can outweigh those of traditional banks, let me give you some facts, and you can decide.

Convenience

The most straightforward reason for the popularity of online banking is ease of use. Online banking affords the user the ability to bank wherever there is an internet connection. A customer’s phone, laptop, or tablet can instantly become the portal that connects them to their bank. With online banking, there is no need for a commute, and there are no lines to brave in wait of a teller. Also, internet banks are not restricted to banking hours. With the use of personal devices, the internet banking customer can virtually enter their bank 24 hours a day, seven days a week.

Better Account Rates

Internet banks have much lower operating costs than conventional banks. Many times these savings are passed on to customers in the form of more favorable account rates. For the most part, banking customers receive higher rates of return on savings and checking accounts, money market accounts, and certificates of deposit. This interest can cause accounts to grow exponentially, which means better long-term gains for customers.

Better Loan Rates

The savings enjoyed by internet banking customers does not end at savings account rates. Loan interest rates are also affected. Those who utilize online banks tend to get better interest rates for mortgages, mortgage refinances, auto loans, and loans for personal use. This can dramatically reduce the amount of interest these customers must pay back over the lifetime of the loan.

Relief From Fees

Disgruntled bank customers have lamented for many years about the cost of fees associated with brick and mortar banks. These fees are numerous and, despite numerous customer complaints, have only seemed to increase. Traditional banks regularly increase ATM fees, overdraft fees, monthly maintenance fees, and other fees, which make it more and more expensive for a customer to spend their own money. Internet banks have much fewer charges associated with their usage, and some do not charge their customers at all. In fact, some online-only banks will pay you back for any ATM surcharges you accrue by using their competition’s ATMs.

Customers looking to switch to an online bank should be careful to appraise the security of these banks identically as they would with a traditional bank. This means any bank considered must be insured at the very least. Insurance is essential for a bank to have, because it allows for customers to receive all of their money in the event of a drastic situation, such as a bank robbery or bankruptcy.

While it is clear that brick and mortar banks are in no danger of becoming extinct within the next decade, it is clear is that online banking will only become more popular as time progresses. Banks with no physical address will become more prevalent because of the perks they offer, while physical banks will struggle to keep up.

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Convenience Over Customer Service? How Online Banks Appeal to a Changing Clientele

There is an unfortunate tradeoff with the implementation of new technology: the more advanced technology becomes, the less personalized our world is as a result. When simple jobs can be performed by robots, as many now can, there’s no need to invest the money into human labor. At certain restaurants, people can place their orders via iPads. You can pay your friends back through an app on your phone without having to travel to an ATM to take out cash. You can book an entire vacation from your phone. You can place an order online without the need to talk with a human until your food arrives at your doorstep. Luckily, the need and desire for human interaction in the way we conduct business still exists, so technology has not eclipsed customer service entirely. But it seems that things could be headed in that direction, and banks are one sector where we can already see that trend.

Without that crucial customer service element, what remains to retain customers? As paradoxical as it may sound, banks are attracting new customers by keeping them away. “Banks are finding new growth opportunities through online and mobile channels, proving once more that consumers are increasingly attracted to the convenience and speed of mobile and online solutions,” says letstalkpayments.com.

When so many people, especially the millennial generation, turn to their phones for just about everything, it only makes sense that banks would tap into that lucrative channel, prioritizing convenience over customer service. Bank transactions dropped off by nearly 50 percent between 1992 and 2012, as online and mobile capabilities came into play. In order to retain customers, banks have had to play by new rules to appeal to a changing clientele.

Some banks are combining new technologies with traditional banking elements to appeal to a younger generation. For example, Savings Bank of Danbury in Connecticut just opened a new branch, and they pulled out all the bells and whistles to cater to tech-savvy millennials. Instead of a person, a large screen recounting the bank’s history in an ongoing loop greets customers as they walk through the door. The new branch features lounges with iPads and laptops where customers can interact with bank staff through technology, rather than face-to-face in a traditional teller line.  

According to Martin J. Geitz, president of Simsbury Bank, the millennial generation are outgrowing the baby boomer generation, and as such are coming to define the economy. Says Geitz:

We are now embarking on the threshold of the millennial generation driving the economy as so many are entering the workforce and their demands and tastes for products and services will really define what banks offer and other consumer-driven products. The millennial generation grew up with a smartphone in their pocket. They have a different relationship with technology than we do. It’s important that we provide functionality at their fingertips.

Banks are offering a variety of features that allow customers to conduct all of their finance needs remotely, without ever setting foot in a bank. For instance, people can now transfer money to one another through cardless ATMs and checks can be deposited through an app on one’s phone just by taking a picture of it. In fact, there is an entirely new breed of banks that’s risen up in response that is moving away from brick and mortar locations entirely, operating solely online. An example of an online bank is Simple, aptly named for its mission to make the banking process as simple and convenient as possible. The bank gained more than 100,00 customers in its first two years and was promptly snatched up by Spain’s second largest bank, Banco Bilbao Vizcaya Argentaria (BBVA).

For the time being, brick and mortar banks are here to stay. They may not be the grand, pillared buildings of years past, with imposing high ceilings and marble floors, but nonetheless, there is a large fraction of the general populace that doesn’t fully embrace or understand technology, and still desires a certain degree of customer service. Mobile banking technology will continue to expand, but it will need to do so in such a way that combines the service of traditional banks with the convenience of online banking.

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