Market Share is Moving to FinTechs and Digital Banks

Younger banking customers are making a decided move away from megabanks like Bank of America, JPMorgan Chase, and Wells Fargo for digital banks and fintechs like Chime, PayPal, and Square, according to research done by Cornerstone Advisors.

Recently, Banker Advisor reported that fintechs like Robinhood, Acorns and SoFi were using consumer-friendly products around debit cards, rounding-up strategies and online investment accounts to cut into traditional banking deposits.

Now primary checking accounts are up for grabs. Megabanks used to control 35% of Gen Zers primary checking accounts. That has dropped to 25% since the pandemic. And while community banks gained share across four generational segments, credit union market share of checking accounts declined between October 2020 and January 2022.

Consumers are clearly looking for a different kind of account — a digital one. According to Forbes, “More than a quarter of Gen Zers (21 to 26 years old) and nearly a third of Millennials (27 to 41) now call a digital bank their primary checking account provider. Among Gen Xers (42 to 56), the percentage who have their primary account with a digital bank grew from 8% to 22%. Overall, six in 10 Gen Zers and Millennials whose primary checking account is with a digital bank has that account with Chime, PayPal, or Cash App.”

Analysts say consumers are using two and three accounts and that the megabanks are no longer the primary account of record.

Financial Super App Gaining Momentum

There may be even more movement. According to PYMNT, almost 60% of consumers want a super app — one that consolidates their financial lives into one integrated user interface.

Paycheck to Paycheck: Do Checking Accounts Matter?

Perhaps checking accounts are not that critical, in terms of real dollars held by individual consumers.Based on survey data from LendingClub, 95% of U.S. consumers have a checking account, but just 29% of those have a running balance of $1,000 or more. Thirty-four percent of checking account holders maintain a running balance of less than $100. Even the 13% who maintain a balance of $2,000 or more may not have the 25% to 30% of monthly expenses some experts recommend as padding in a checking account.

Moreover, according the data, “The number of consumers living paycheck to paycheck has increased steadily since April 2021 and now is 12 percentage points higher than it was then, with a three-percentage-point jump between December 2021 and January 2022. Consumers of all income brackets are increasingly living paycheck to paycheck, including those earning higher incomes.”