Fintechs, digital banks make gains in battle for checking accounts

Traditional banks are no longer dominating the percentage of new checking accounts that are being opened, as new digital players and fintechs gain ground in the battle for the type of accounts long viewed as the anchor product of a consumer’s financial relationship. 

The data is from a new survey by Cornerstone Advisors, which found that digital banks and fintechs made up nearly half (47%) of all new checking accounts opened so far in 2023, up from 36% in 2020. 

Over the same period, the share of checking accounts opened at the nation’s largest banks dropped from 24% to 17%, while regional lenders’ share declined from 27% to 21%, according to the survey. Community banks’ and credit unions’ share of new checking accounts remained flat at 12% during the period. 

But despite the gains that fintechs and digital banks have made in recent years, consumers aren’t ready to completely ditch their accounts with traditional banks, thanks to consumers’ evolving attitudes toward the definition of a primary financial institution. 

Of the consumers who opened a checking account in 2022 or 2023, nearly a third said they have more than one checking account, according to the survey. 

“The idea of a primary financial institution is a meaningless thing, because [Gen Z and millennials] have so many financial relationships,” researchers said. “Their financial relationships are not just with providers of accounts, but providers of tools.” 

Many fintechs offer tools that legacy banks lack and boosted by the growth of third-party platforms like MX and Plaid that enable easy money movement, customers are willing to spread their funds across a variety of accounts in order to craft a financial cocktail that fits their needs, according to the data. 

“The growing disintermediation of consumers’ financial footprints is challenging traditional banks to rethink the checking account product,” researchers wrote. 

But certain factors are still giving traditional firms an advantage and may be keeping consumers from completely ditching their relationships with a legacy bank. The ability to walk into a bank branch to resolve an issue in person is still considered an important reason to maintain an account with a bricks-and-mortar institution. 

Consumers may also have safety concerns and could be wary of banking entirely at a startup neobank, even if deposits are insured through the fintech’s sponsor bank. 

Still, financial institutions can’t ignore the fact that consumers are increasingly willing to move money around a mix of platforms in order to access the tools and features they want. “There’s reasons why they maintain that traditional bank relationship, but they’re going to the new ones because there’s some feature functionality or some product aspect that they’re looking for and want to get,” Cornerstone execs said. 

While only a fraction of Americans opened new checking accounts this year (14%), that number is growing, according to Cornerstone’s research.  

In 2022, 15% of consumers said they opened a new checking account. That’s up from 12% in 2021 and 10% in 2020, according to the firm’s survey results.