Recent research from Cornerstone Advisors shows that online banking and fintech companies like Chime, PayPal, and Square are growing.
Megabanks like Bank of America, JPMorgan Chase, Citi Bank, and Wells Fargo are declining as consumers’ primary checking account providers.
According to Forbes, there has been a dramatic increase in Americans’ primary checking accounts with digital banks since 2020.
Twenty-five percent of Gen Zers (21 to 26 years old) and nearly 30 percent of Millennials (27 to 41 years old) have a primary checking account with a digital bank. Generation Xers (42 to 56) experienced an increase from 8% to 22%.
What can the Cornerstone data on primary checking account status tell us about the industry?
- Digital banks are no longer the “challenger” banks. Online banking has won. Generation Zers and Millennials are more likely to refer to a digital bank as their primary checking account provider than they are to refer to a community bank or a credit union.
- Consumers are searching for different types of online banking accounts. Checking accounts are an inaccurate term for what digital providers are offering. They are more like mashups of previously separate accounts. In CashApp, for example, crypto and tax preparation are built-in features that aren’t found in traditional checking accounts.
Over the course of 2021, the number of active accounts at 13 leading challenger banks tracked by Cornerstone grew by 43%, from 27.3 million to 39.1 million. Nearly half—45%—of the total increase came from Chime and Current together.
Chime is Still the Leader in Online Banking
Chime was the market leader for online banking in early 2021 when Cornerstone sized the online banking market, with more than 12 million customers. After one year, Chime continues to lead the pack with over 14.5 million customers, an increase of 21% year-over-year.
What are they doing well? Originally targeted at teens, Current has taken on Chime’s target market with products like early payroll access, fee-free overdrafts up to $200, and cash back.Digital banking is a very different world than it was a decade ago, there’s no doubt about that.
According to consumer attitudes, one of the biggest differences is the percentage of consumers who say that digital banking capabilities are an influential factor to consider when choosing a checking account provider.
Consumers now say that the location of the branch is less significant than digital banking in study after study.