Fintechs’ Cool Factor vs. Banks’ Staying Power: Which Will Prevail Long-term?

Fintech's seamless mobile experiences and rapid innovation threaten traditional banking's customary way of doing business. Yet legacy players' comprehensive guidance and expansive offerings may prove difficult to displace.

In today’s digital age, the way consumers interact with their finances has undergone a significant transformation. Innovative fintech companies have reshaped how consumers access and manage their money through sleek mobile apps and user-friendly interfaces. These “disruptors” promised convenience and a seamless experience, challenging traditional banking institutions to up their game.

However, as consumers embrace the allure of fintech solutions, questions arise about their ability to truly support long-term financial growth and stability.

Rivel’s Q1 2024 Banking Research, based on 280,000 consumer interviews across the U.S., shows how different institutions (and tools) succeed in different areas. While fintechs excel in accessibility and attractive user experiences, evidence suggests that traditional banks still hold an edge when it comes to providing comprehensive financial guidance and nurturing lasting financial well-being.

According to Rivel’s newest research, 56% of Millennials have at least one fintech checking or savings account in 2024. Millennials are now the largest generation in the U.S., numbering 72 million consumers, so how can institutions ensure that they’re not only attracting new customers in this competitive environment but keeping them long-term?

Fintech’s Edge in Rapid Innovation

Over the past decade, technological progress and innovation have catapulted the fintech sector to the forefront of financial services. The benefits have been wide-ranging, including lower fees, easy-to-use interfaces and accelerating innovation on behalf of customers over time.

Fintechs also often charge lower fees or offer subscription-based models, appealing to cost-conscious consumers. According to a Harris Poll, 78% of fintech consumers say they have saved money by making a switch from a traditional bank. Conversely, banks may have a wider range of fees associated with various services, which can be frustrating and opaque to customers — 32% of consumers in Rivel’s research are likely to leave their current bank due to high fees. Additionally, fintechs are increasingly prioritizing transparency by providing clear explanations of fees and charges, whereas banks may not always offer the same level of clarity.

“I love the convenience with [my digital bank] that you can overdraw with no fees — they simply take it out of my next deposit.”

– Millennial customer at national fintech

Digital-only banking options often prioritize a mobile-first approach, offering intuitive apps that streamline financial tasks. Conversely, traditional banks may still rely on outdated interfaces and complex navigation, creating a less seamless experience. Additional research by Rivel Banking Research found that fintechs prioritize personalization, tailoring features and recommendations based on individual needs, while most banks still adopt a one-size-fits-all approach.

Within Rivel’s latest consumer research, digital banking leaders Chime and Varo lead the industry in terms of good mobile app, with close to 90% satisfaction while the national average is only at 78% satisfaction. Moreover, because their consumer base skews so young, their relative share of wallet is highest in the country — focused on checking and savings options, primarily.

Unburdened by legacy systems, fintechs are able to rapidly innovate and integrate new technologies into their offerings. This allows them to stay ahead of the curve, offering features like automated budgeting tools, gamified savings goals and seamless integration with other financial services. As of Q1 2024, the top demand of consumers in an online banking experience is early access to deposits (48%), which has become a mainstay in fintechs in the past year, showing their ability to evolve quickly.

Despite offering personalized recommendations, only 10% of consumers in Rivel’s research switched to a fintech for this reason. The primary driver, at 71%, was the desire for 24/7 access to banking services and accounts. This highlights a challenge for traditional banks: How can they compete with the on-demand convenience and perceived ease of use offered by digital banking? Can traditional means of doing business and relationship-building actually be a differentiator?

Stability, Services and Retention

The physical presence of branch networks continues to be an advantage for traditional banks, offering a level of personal service that purely digital platforms struggle to replicate. Face-to-face interactions can be critical for resolving complex issues, obtaining financial advice and building long-term relationships with financial advisors. While fintech platforms often lead in terms of convenience and innovation, the value of human interaction and personalized service in banking should not be forgotten.

According to Rivel’s most recent research across the U.S., there is a difference in customers’ experience with banks and fintechs: 37% of bank customers and only 29% of fintech customers receive personal advice most/all of the time, bucking the assumption that fintechs are personalizing effectively.

What Consumers Are Looking For:

The top demand from consumers in their digital banking experience:
Deposits (48%)

Beyond personalization, there is a level of friendliness, openness and relationship that builds between a banking institution and their consumers over the years: Traditional institutions know and understand their customers better. In our Q1 2024 research, 48% of bank customers agree that their institution understands their financial needs versus only 34% of fintech customers. This number is even higher for older generations — 65% of Baby Boomers believe that their bank or credit union understands their needs, over 20 points higher than any other generation.

The range of products and services offered by traditional banks is crucial for catering to the diverse financial needs of individuals and businesses. From basic checking and savings accounts to more complex services like wealth management and commercial lending, these offerings provide customers with a one-stop shop for financial services. This variety not only allows consumers to manage their finances more effectively but also fosters a stronger customer relationship, driving increased loyalty and retention. Moreover, a broad range of services can help banks differentiate themselves in a competitive market, attracting a wider customer base and generating multiple revenue streams, a shortcoming of most fintechs.

U.S. customers who opened a new bank account in last six months

wdt_ID Reason why customer opened a new account Percent
1 Promotional offer 19%
2 Range of products/services offered 15%
3 Pre-existing relationship with that FI 13%
4 Friend/family referral 12%
5 Quality/ease of tech use 10%

Traditional banks offer unique advantages including physical branch access and potentially stronger security measures with support from the FDIC, while fintechs can rapidly innovate and offer attractive financial interfaces, opening up accessibility to those who need it most.

The future of finance may lie in collaboration rather than competition. Traditional banks can learn from the user-centric approach and technological innovation of fintechs. Conversely, fintechs can leverage the established trust and security infrastructure of traditional banks. Ultimately, consumers will benefit from a more competitive and evolving financial services landscape that is working for them.

In 2024, The Financial Brand and Rivel have partnered on bringing bank professionals exclusive primary research on U.S. banking consumers, on a monthly basis. For more information on Rivel Banking Research’s benchmarking, market opportunity highlights and on-hand brand perception insights for your institution, contact: Corey Wrinn, Managing Director, Rivel Banking Research at [email protected]

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