Newcomers Raise the Bar for Traditional Banks
Chime has been in business for less than a decade, but it is already outperforming U.S. banks that are more than 100 years old.
The San Francisco-based neobank made its first appearance in the annual Novantas 2020 U.S. Banking Shopper Survey and quickly claimed the top spot for distinctiveness. It also ranked highly in several other categories.
Varo, another digital newcomer in the Novantas consumer research, also notched a strong showing.
Traditional bankers may be tempted to dismiss these new entrants. After all, their customer accounts typically have lower balances than traditional banks. And who knows if they will even exist five years from now?
But the message for traditional banks is clear: these players are raising the stakes in terms of functionality and distinctiveness. And consumers are willing to try out new non-bank providers for their financial services.
Many banks have made significant improvements to their digital capabilities, but consumers aren’t going to wait around for them to catch up to these newcomers.
The research dives into the demographics and characteristics of people who are shopping for checking accounts, as well as their preferences.
It includes consumers who have switched their primary checking provider in the past three years and those whom are open to switching. These people are younger and less affluent than the traditional targets of most financial institutions, underscoring the importance of seamless and advanced digital capabilities.
They are also the banking industry’s future.
In addition to demographic profiling, the survey explored differences in consumer financial confidence and attitudes toward financial innovation. Novantas has identified six attitudinal clusters that reflect varying levels of comfort with branchless, app-driven banking. The research also explores their anxieties about current financial positions.
This research report is based on a survey conducted last fall of 118 banks across 42 designated market areas (DMA). In addition to Chime and Varo, Novantas added 11 small regional banks to the pool and also expanded the survey to include respondents from Buffalo, N.Y.
The 9,185 respondents include:
“Recent Purchasers” — have switched primary banks in the past three years
“Prospective Switchers” — are either actively shopping or open to switching