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Wells Fargo financial scandal in 2016 diminished consumer trust in traditional banks while driving homebuyers to fintech lenders for mortgages, study suggests

July 7, 2025 //  by Finnovate

The Wells Fargo financial scandal in 2016 diminished consumer trust in traditional banks while driving homebuyers to fintech lenders for mortgages, a University of California, Davis study suggests. The paper was written by Keer Yang, an assistant professor in the UC Davis Graduate School of Management specializing in finance and financial technology. The difference in interest rates and other fees for comparable 30-year, fixed-rate loans on single-family homes between banks and fintech lenders did not change after the 2016 scandal.  “Therefore, it is trust, not the interest rate, that affects the borrower’s probability of choosing a fintech lender,” Yang wrote. Yang analyzed Gallup poll answers regarding trust in banks, internet searches on Google Trends on bank scandals, newspaper articles about the Wells Fargo fines and scandal, and deposits and mortgage loan data sets in traditional banks and in fintech lenders. The period examined was 2012 to 2021. Use of financial services increased from 2% of the market in 2010, before any knowledge of the Wells Fargo scandal, to 8% in 2016, according to the research paper. Furthermore, in areas with Wells Fargo banks—where exposure to the scandal was more pronounced—customers were on average 4% more likely to use non-bank lenders than any banks after 2016. The scandal had a minimal effect on bank deposits, probably because of the protections afforded by deposit insurance, Yang said.

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