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The days of physical banks and tellers behind the counters are dwindling. Banking today is about everything that happens on a screen, from traditional banks offering apps to online-only banks you’ll never encounter in person.
Looking at data from Finder’s Neobank Adoption survey (”
neobank
” is the technical term for an online-only bank), it is obvious that
digital bank
is not a niche market.
Online banking is just too convenient to ignore
Online banking is no longer just for millennials. About 30% of the U.S. population either has an online-only bank account or plans to open one, according to the Finder survey. There are several reasons why online-only banks like Betterment, Wealthfront, and Ally have won over tech-savvy consumers: lower fees, higher interest rates, and perhaps most importantly, convenience.
Across all three generations, 57% of Americans surveyed said online banking offered a level of convenience they couldn’t get at physical locations.
While younger generations are more likely to have an online-only bank account or are considering opening one, older generations are warming to the idea. According to Finder, around 27% of millennials and 30% of Gen Xers said they had an account at an online-only bank, while around 8.8% of baby boomers said they had an account at one of these. banks – and 4.4% of baby boomers said they planned to open one.
While physical banks have to spend money to keep their branches open,
online banks
don’t have this extra cost. This means more money is left over to provide customers with higher interest rates on chequing, savings, money market accounts and certificates of deposit, and fewer fees need to be charged to reach profitable level. This is why online banks like Ally can offer financial products with big returns like High Yield Savings Accounts – compare Ally’s variable APY of around 1.7% to 2.2% to 0.01% to 0.1% of traditional banks – and why the bank branch down the street can’t match that rate.
People do not change if they are satisfied with their current experience
Americans still do business with brick-and-mortar banks in large numbers, but apparently it’s not because they don’t trust online banks or need to talk to someone in person. In large part, it’s because they’re happy with the bank they already have.
When asked why they hadn’t opened an online-only bank account yet, 73% of Americans of all generations said it was because they were happy with their current bank. Less than a quarter of Millennials and Gen X respondents said they didn’t switch because they preferred to talk to someone in person or because they didn’t trust banks online. line only. Baby boomers feel slightly different, with 35.7% preferring to speak to someone in person and 22.8% wary of online-only banking.
But even people who stick to traditional banking services are going digital.
Seven in 10 Americans used a mobile app to manage their online banking information in September 2019, according to data from the American Association of Bankers. Americans have become even more open to using online platforms, with 34% of American adults saying they have made an online payment or transfer through their bank in the past year, up from 29% in 2018.
Of those with bank accounts that have a mobile app or website, 75% said they would rate their online or app banking experience as very good or excellent. Only 5% rated their experience as bad or fair.
Online banking is here to stay.
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