Banksplaining

Executive Summary

Banksplaining refers to the overcomplicated or patronizing explanations provided by banking professionals to customers, regulators, or even colleagues.
It can hinder transparency, customer trust, and financial literacy.
Exists across retail, commercial, investment banking, asset management, risk management, compliance, fintech, and specialized banking sectors.
Significant in customer relations, regulatory discussions, and financial product marketing.
Understanding banksplaining helps improve communication, simplify financial concepts, and enhance customer satisfaction.

Definition of Banksplaining

Banksplaining is a term used to describe when banking professionals explain financial concepts in an unnecessarily complex, jargon-heavy, or condescending way. It often affects individuals who lack financial expertise, making it difficult for them to make informed decisions.

This phenomenon is prevalent across various banking sectors, from retail and commercial banking to investment and asset management. By using technical terms or overcomplicating simple financial matters, banks may unintentionally—or sometimes intentionally—create confusion, leading to diminished trust and engagement from customers and regulators.

Background / Backstory on Banksplaining

The term “banksplaining” is derived from the broader concept of “mansplaining” and has been adapted to the banking industry. Historically, financial institutions have used complex language to maintain an air of authority, exclusivity, and control over financial knowledge. This has contributed to a lack of transparency and financial literacy among the general public.

As banking services evolved with digital transformation and regulatory scrutiny increased, the issue of banksplaining has become more apparent. With customers demanding greater clarity and understanding, financial institutions are now being pushed to adopt more transparent communication strategies to build trust and improve customer experiences.

How Banksplaining is Used in the Industry Today

Banksplaining is prevalent in various banking sectors, often creating unnecessary barriers between financial institutions and their customers. Whether in retail banking, wealth management, or regulatory compliance, professionals may use complex terminology that makes financial products or services seem more intricate than they actually are.

This often leads to customer frustration, poor decision-making, and a general lack of trust in banking institutions. By making financial language more accessible, banks can enhance consumer confidence and financial literacy.

Retail Banking: Used to explain interest rates, loan terms, and savings accounts, often making it difficult for customers to compare options.
Commercial Banking: Can obscure lending conditions, risk assessments, and compliance requirements for businesses.
Investment Banking: Often occurs when discussing mergers, capital markets, and financial instruments, making it challenging for non-experts to understand their implications.
Wealth Management: Used in portfolio management discussions, leading clients to trust advisors without fully comprehending investment decisions.
Regulatory Compliance: Institutions might banksplain to regulators or auditors, complicating oversight efforts.
Fintech and Digital Banking: As banking tech evolves, companies may banksplain features, security protocols, or digital transformation processes.

How Banksplaining Works (Examples)

Banksplaining typically occurs when financial professionals overcomplicate explanations, leading customers or stakeholders to feel confused or overwhelmed. This often results in a lack of transparency and difficulty in making well-informed financial decisions.

The following examples illustrate common instances of banksplaining.

Example 1: Mortgage Loans

Customer asks: “What’s my effective interest rate?”
Banker responds: “Well, considering the APR, compounded over an annual basis while adjusting for closing costs and front-loaded interest amortization, the effective interest rate is based on a diminishing principal structure.”
Reality: The banker could simply say, “Your true cost, including fees and interest, comes out to about X% per year.”

Example 2: Investment Portfolio

Client asks: “What are the risks in my portfolio?”
Wealth manager responds: “Given the beta coefficients and Sharpe ratios, we see that your exposure to systemic risk is within the standard deviation threshold, with a convexity profile that aligns with macroeconomic trends.”
Reality: “Your investments might fluctuate in value, but we’ve balanced them to limit losses during downturns.”

Analogy for Banksplaining

Imagine you go to a mechanic to understand what’s wrong with your car. Instead of saying, “You need a new battery,” they say, “The internal chemical reaction efficiency of your current energy storage unit has deteriorated due to extensive thermal cycles, leading to insufficient cranking amps.” That’s banksplaining in finance.

ELI5 (Explain Like I’m 5)

Banksplaining is when a banker explains money stuff in a way that’s too complicated, instead of making it simple. It’s like when a grown-up uses big words when they could just say, “You need to save money so you can buy more toys later.”

Stakeholders and Implementation

Banksplaining affects a range of stakeholders, including banking professionals, customers, and regulators. While banks may use complex language to maintain authority, this often leads to customer frustration and regulatory challenges. Addressing banksplaining requires institutions to prioritize transparency and clear communication.

Who Uses Banksplaining?

Bank employees (tellers, loan officers, investment advisors, compliance officers).
Regulators and auditors dealing with banks.
Customers facing complex financial decisions.

Implementation & Challenges

Financial institutions rely on industry jargon, which can confuse customers.
Overcoming banksplaining requires training in customer communication and financial education programs.
Regulatory bodies push for clearer disclosures, but enforcing simplicity is challenging.

Pros & Cons of Banksplaining

Pros

Maintains exclusivity for financial professionals.
Can prevent excessive questioning or scrutiny.
Helps professionals communicate efficiently amongst themselves.

Cons

Leads to customer confusion and mistrust.
Complicates financial literacy efforts.
Creates potential for regulatory misinterpretations.

Future Outlook

The future of banksplaining will be shaped by increasing financial literacy efforts, regulatory pressure, and technological advancements. As digital banking grows, AI-driven financial education tools and simplified communication strategies will become essential. Regulators are expected to push for clearer disclosures, making it harder for banks to hide behind complex jargon. Additionally, customer-centric banking models will encourage transparency, making financial institutions more accountable for providing understandable information. As the demand for financial inclusion rises, banks will need to prioritize straightforward communication to foster trust and long-term customer relationships.