5 Ways Banks Have Gotten Better Over Time

They're still not perfect, but they've definitely improved.

Most Americans have a bank account of some kind. According to the Federal Reserve report "Economic Well-Being of U.S. Households in 2021," only 6% of Americans lack one. But the banks and banking in this country have come a long way, particularly over the last century or so, since we've been operating under our current banking system.

Thankfully, many of the changes made over time have resulted in more equality, convenience, and lower costs for ordinary Americans. Here are a few ways banks have gotten better, as well as what these changes mean for you as a bank account holder.

1. The creation of the Federal Reserve

The start of our modern banking system was with the establishment of the Federal Reserve. President Woodrow Wilson signed the Federal Reserve Act into law on Dec. 23, 1913. The Federal Reserve (or "the Fed," as it's also known) is responsible for ensuring the safety of the American banking and financial system by influencing money and credit policies.

The Fed regulates and supervises banks and other financial institutions, and also provides financial services to the U.S. government and foreign institutions. Banking in the U.S. operated quite differently prior to the creation of the Fed, and it was a lot less stable. Panics, bank runs, and bank failures used to be a lot more common.

How does this help you?

We often refer to the Fed in the context of setting Federal Reserve interest rates, which do not directly equal consumer borrowing rates (although the two are linked). But it may surprise you to know that the Fed protects you in lending and deposit transactions. Let's say you want to take out a mortgage loan to buy a home. Fed examiners ensure that you're informed of the interest rate you'll be paying and that you're not being extended a loan you can't afford to pay back. The Fed also regulates debit card transactions, making sure they're conducted fairly and with appropriate fees.

2. Establishment of the FDIC

The Federal Deposit Insurance Corporation was established during the Great Depression, as part of the Banking Act of 1933. The FDIC's goal is to maintain stability and public confidence in U.S. banking and finance. It does this through deposit insurance, regulation of financial institutions, and acting as the receiver for failed banks.

How does this help you?

The FDIC has been in the news a lot lately, thanks to the failure of Silicon Valley Bank. A lot of ordinary people have been wondering what would happen to their money if their bank collapsed. The FDIC insures bank deposits for up to $250,000 per account holder, so if you have a deposit account (checking, savings, CD, or money market account) with a balance of less than that, your money will be returned to you in full if your bank fails. You can check the BankFind tool to see if your bank is on it.

3. Greater equality in banking

As the 20th century wore on, the financial system became more equitable, with more and more Americans getting access to bank accounts, loans, credit cards, and more. While women started to be able to open bank accounts of their own in the 1960s, more work was needed to ensure equality in banking. A hallmark piece of legislation involved in this process was the Equal Credit Opportunity Act, which was signed into law in 1974. This law, which applies to banks and lenders of all kinds, ensures that those seeking to borrow money can't be discriminated against on the basis of race, religion, sex, marital status, age, and more.

How does this help you?

Everyone should be able to do business with banks without fear of being turned down due to circumstances beyond their control, like their sex or race. You have the ability to open your own bank account, open a credit card account, borrow money, and otherwise use the financial system thanks to steps toward greater equality in banking.

4. The rise of online banking

If you were born after the internet revolutionized life as we know it, online banking may not seem like such a big deal to you. I remember visiting the bank with my parents as a young kid, and back then, there was no option to check your account balance on your computer or smartphone app (in fact, smartphones didn't yet exist). You also couldn't deposit a check by taking a photo of it, and would need to visit the bank in person, during business hours, to hand that check (and a deposit slip) off to a teller.

According to FinTech Magazine, in 1994, Stanford Federal Credit Union was the first bank in North America to offer internet banking to its customers. Banks today likely couldn't expect to stay in business for long without offering online services. And some banks are now entirely online, without branches or in-person transactions of any kind. According to Statista data, 65.3% of Americans used digital banking in 2022. (I'm surprised that number isn't higher, honestly.)

How does this help you?

As banking technology evolves and increasingly moves online, the benefits to you are immeasurable. Online-only banks have become known for offering higher APYs on savings accounts, CDs, and money market accounts, and usually without fees to boot. Mobile banking apps are incredibly convenient and let you have a look at your account balance, send money to a friend, deposit a check, or transfer cash with just a few taps, anywhere, and at any time. No more turning up at the bank to find it closed, or waiting on hold with customer service.

5. Bank fees are being phased out

A more recent development in the history of banking has been the decline of bank fees. These have historically included account maintenance fees, fees to use out-of-network ATMs, and overdraft fees, and they've been a real drag for consumers. After all, if you've overdrafted your bank account, the last thing you need is to end up even deeper in the hole thanks to being assessed a $35 fee by your bank.

Online-only banks generally have no or lower fees than traditional banks because they have fewer overhead costs (the same reason they can offer higher APYs). But some major traditional banks are also lowering or canceling fees altogether, which is a welcome development. After all, why should we have to pay to keep our money in a bank?

How does this help you?

The phasing out of bank fees saves you money, plain and simple. Life can be busy, and if you forget to check the minimum balance requirements on your bank account and get assessed fees for dropping below the limit, you might end up kicking yourself for it. If your bank account has no fees at all, there's no reason to worry.

Everyone has a story about how their bank could do better in one area or another. But banks have definitely improved over the last century, becoming more consumer-friendly and easier to do business with. That's certainly worth celebrating.