The Truth About Online-Only Banks: How to Separate Real Risks from Red Herrings
By Cynfor Lu, Senior Research Analyst at Rivel Banking Research
Simple Subscribe
Subscribe Now!
With Chime’s June 2025 IPO, online-only banking has moved further into the mainstream. A recent Rivel Banking Research study of more than 200,000 banking consumers across the U.S. found that 51% now have a checking or savings account with a digital bank.
For traditional banks and credit unions, ignoring these competitors is no longer realistic. But it is just as easy to overreact and assume online-only banks are on the verge of reshaping the entire industry overnight.
A more useful approach is to separate the real risks from the red herrings: where digital banks are genuinely gaining ground, and where traditional institutions still hold meaningful advantages.
What You Don’t Need to be Concerned About
Reality check #1: Trying to track every new online-only banking option is not the main concern.
It feels as though every week brings a new fintech startup or neobank. With so many options, it can seem impossible to keep track of changes and stay current on new players in the industry.
Still, awareness of online-only banks significantly trails awareness of traditional institutions. Rivel Banking Research defines awareness as the percentage of people who recognize a specific brand by name. Across the United States, the average traditional bank has awareness of 31%. Among the 11 largest digital banks, only Chime, SoFi, Ally Bank and Dave have awareness above 25%.
Key insight: In other words, market awareness is highly concentrated among a few digital-first brands. For traditional institutions, the practical takeaway is clear: focus on the handful of digital banks with meaningful scale, not every new entrant that appears in the market.
Reality check #2: Online-only banks fully replacing traditional banks is also not the most immediate threat.
When Rivel Banking Research asked consumers what an online-only bank would have to offer to get them to switch from a traditional bank, 31% said it would need to offer all the same banking products and services as a traditional institution.
Online-only banks are often very good at solving specific financial needs. Chime has gained traction through credit-building tools and early access to deposits, while Varo has leaned into industry-leading rates on high-yield savings accounts.
These focused value propositions can be compelling, but the breadth of product and service offerings still does not match most traditional banks. Chime, the most prevalent of these digital banking options, still offers a relatively limited set of core products. Even SoFi, which has one of the broader product suites among alternative banking providers, still does not offer CDs or traditional money market accounts. Product breadth remains an important differentiator for traditional banks and credit unions.
Key insight: Along with demand for a built-out product suite, many consumers still want the option to visit a branch. It is no accident that Bank of America announced plans in 2025 to open 150 new locations by the end of 2027. Branch usage has remained steady over the past few years, and 67% of banking consumers still say nearby branches are a necessity when considering a new financial institution.
The bigger issue is not whether digital banks can replace traditional institutions all at once, but whether they can steadily win the next product, account, or moment of need.
What You DO Need to be Worried About
Reality check #3: Strong consideration scores for online-only banks are worth watching.
Rivel Banking Research also measures consideration — not just whether consumers know a brand, but whether they would consider using it as a banking option. Despite lower awareness, online-only banks punch well above their weight on this metric. One useful lens is the consideration-to-awareness ratio, or the share of consumers who are aware of a brand and would also consider it.
Across the U.S., the average traditional bank has a consideration-to-awareness ratio of around 20%. Among the top 11 digital banking options, the average is 40% — twice as high. Chime leads this metric, with 56% of aware consumers also saying they would consider it as a future banking option.
Key insight: The competitive threat is not broad awareness alone, but the ability of online-only banks to convert awareness into consideration.
Reality check #4: Changing consumer priorities are also a real concern.
Rivel Banking Research began asking what an online-only bank must offer to get consumers to switch from a traditional bank in early 2024. The most recent study, conducted early 2026, shows the percentage of those saying, “There is nothing they could do,” has decreased from 23% to just 17%. That shift is consistent with broader signs of increasing digital bank adoption and acceptance.
Twenty-four percent of those currently seeking a checking or savings account indicate they are likely to open an online-only primary account in the next year, up from 16% just two years ago.
The same research points to one reason behind the shift: a decreasing reliance on human interaction in the banking process. As more consumers become comfortable completing routine banking tasks without staff assistance, one of traditional institutions’ long-standing advantages becomes less decisive.
The data points in one direction. Consumer priorities are changing, and they are changing in favor of online-only banks.
What This Data Reveals About Consumer Behavior
What is it about online-only banks that boosts consideration and shifts consumer priorities? Digital-first banks may not fully replace traditional institutions, but they can still weaken the relationship over time. The real risk is less about wholesale displacement and more about gradual erosion: one product, one account, and one financial need at a time.
Because of their smaller product offerings, online-only banks make it easy for consumers to open just one account or product. There is less analysis paralysis and less perceived pressure to move the rest of the relationship. The banking process shifts from a bundled relationship to a pick-and-choose menu of options. The concern is not necessarily that customers will move everything to Chime. Instead, the concern is that they will move their checking into Chime … and then their savings into SoFi … and then get their auto loan from Ally Bank.
To slow the erosion of share of wallet to digital banks, traditional institutions need to be clear-eyed about both their advantages and vulnerabilities:
- Differentiate on trust and longevity. The oversaturation of low-awareness online-only banks gives traditional institutions an opening. Rather than positioning against every digital competitor, focus messaging on stability and experience, and target the limitations of just the largest and most relevant players.
- Make physical presence visible and valuable. Branch access, broader product choice and local market presence still matter. Marketing around branch access and product options will be more effective for retaining customers than trying to compete on rates or technology. These advantages should be made visible in marketing, onboarding, and retention efforts.
- Reduce friction in account opening and onboarding. The easier it is to consider and open an account with a traditional institution, the less compelling the digital-bank alternative becomes. Digital account opening, simple onboarding, and easy communication channels can all help protect the relationship.
- Measure changing priorities continuously. Banks and credit unions cannot adjust messaging, product strategy or retention efforts around changing consumer needs if they are not measuring those needs regularly. Utilize data, surveys and focus groups to keep track of and stay ahead of changes in the banking sphere.
Bottom line: The age of online-only banking is here, but that does not mean the age of traditional banking is ending. The institutions that win will be the ones that understand where digital competitors are truly gaining ground, and are able to protect the parts of the relationship that still matter most and make it easier for consumers to choose them one product at a time. The threat is not that customers will leave all at once. It is that, without a clear response, they may slowly stop seeing their primary institution as the obvious first choice.
