Fintech, or financial technology, can be defined as the integration of technological advancements with financial services offerings, ranging from mobile banking and robo-advisors to cryptocurrency and blockchain. Fintech is the main enabler of more efficient banking experiences, more secure financial transactions, stronger engagement with finances through mobile apps, and even greater access to investing through low-cost robo-advisors. Fintech has also served to make the financial services industry a more inclusive and fair environment, offering broader access to credit and providing meaningful financial products to disadvantaged members of society.
The two main challenges that still face fintechs are brand awareness and trust – only amplified by tech players (eg Apple) and retailers (eg Amazon) continuing to enhance their suite of financial products and services. Openness to banking with retailers and tech companies is also much higher than that of pure neobanks, given the vast brand equity these providers possess – evidenced by the third of consumers that would open a financial account with Amazon.
As competition in the industry grows fiercer, legacy FIs must seek value-filled partnerships with fintechs and non-banks as a means of tapping into new audiences, and accelerate their pace of innovation.
This report looks at the following areas:
- Consumers’ usage of fintech in everyday life
- Attitudes toward security and personal finances
- Willingness to bank with non-traditional providers
- Why consumers would consider banking with non-traditional providers
- Attitudes toward fintech
Fintech is a force that has driven banking innovation while democratizing access to fundamental financial services for underserved segments.
Amr Hamdi, Senior Analyst – Financial Services
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EXECUTIVE SUMMARY
- What you need to know
- Today's banking customers deeply desire an experience that is reflective of their unique needs and behaviors
- Graph 1: importance of a personalized banking experience, by generation, 2024
- Real-time and proactive efforts are two sides of personalization that unlock the most value for customers
- Super prime and prime consumers are highly interested in credit card offerings from non-banks
- Graph 2: non-banks consumers would open a credit card with, by self-reported credit score and interest in opening a credit card, 2024
- Near prime and subprime remain addressable markets for credit-building services
- Graph 3: interest in opening a credit card with a non-bank, by self-reported credit score and household income, 2024
- Multicultural consumers are the highest users of digital remittances
- Graph 4: interest and adoption of digital remittances, by race and ethnicity, 2024
- Digital remittances are a crucial inclusion tool
- Market predictions
- Opportunities
- More than half of consumers are interested in annual roundups of their financial habits
- Graph 5: interest in banks providing an annual financial roundup, by generation, 2024
- Consistent outreach through roundups can deepen engagement while driving cross-sell acquisition
- Personal loan holders' openness to text engagement with their banks provides a natural cross-selling opportunity for FIs
- Graph 6: openness to having bank send texts about new products and offers, by financial product ownership, 2024
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MARKET DYNAMICS
- Market drivers
- Open banking lands in the US, but consumer acceptance will still take time
- Revolut rolls out a virtual card allowing customers the ability to pay for any purchases using crypto without any exchange fees
- Chase, the largest bank in the US, plans to increase its physical branch footprint across inner cities and rural areas
- Graph 7: percent change of branch closures, by household income and race/ethnicity, 2019-2023
- In-person services are crucial to deepening relationships with underserved segments
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CONSUMER INSIGHTS
- Consumer fast facts
- Channels used to interact with financial institutions
- Mobile apps are the most-used channel to interact with financial services providers
- Graph 8: channels used to interact most often with financial services companies, 2019-24
- While digital remains a crucial engagement channel, what will set banks apart is how they can position in-branch services
- Older consumers are increasingly embracing digital solutions
- Graph 9: usage of mobile app to interact with financial services providers, by generation, 2021-24
- Boomers are significantly more preferential to online versus mobile banking
- Graph 10: online vs mobile app usage when interacting with financial services companies, by generation, 2024
- FIs must tailor security communications based on customers' current preferences
- Interest in and adoption of fintech
- Exactly half have used biometric authentication, with younger generation the leading adopters
- Graph 11: biometric identification adoption, by generation, 2021-24
- Crypto remains a young person's game
- Graph 12: cryptocurrency adoption, by generation, 2021-24
- What a new administration could hold for crypto's future adoption heading into 2025
- Pure-play BNPL continues to lead bank BNPL, but the gap is close
- Graph 13: pure-play vs bank BNPL adoption, by generation, 2024
- Multicultural consumers are significantly higher users of pure-play BNPL
- Graph 14: pure-play vs bank BNPL adoption, by race and ethnicity, 2024
- Lower-earners are more preferential to pure plays, while high-earners are closely matched through bank BNPL
- Graph 15: pure-play vs bank BNPL adoption, by household income, 2024
- How banks can compete in a pure-play world
- Financially struggling consumers are most interested in financial wellness tools
- Graph 16: interest in and awareness of financial wellness tools, by financial situation, 2024
- Partnerships are a natural avenue FIs can pursue to capitalize on the growing interest in payment capabilities via wearables
- Graph 17: interest in and adoption of wearable payment devices, by household income, 2024
- Fintech and security
- Younger generations are more accepting of open banking models
- Graph 18: openness to data sharing with FIs, by generation, 2024
- Consumers' sentiments toward tech advancements are driven by age
- Graph 19: attitudes toward tech advancements and impact on security, by generation, 2024
- Cybersecurity communications remain essential to driving greater comfort in adoption of digital solutions
- There are links between heavy mobile app users and comfort with biometric authentication
- Graph 20: comfort with biometric authentication, by most used channel to interact with FIs, 2024
- Four-in-ten Gen Zs prefer mobile wallets to physical cards for purchases
- Graph 21: attitudes towards mobile wallets vs physical cards to make purchases, by generation, 2024
- Affluent investors are most willing to pay a premium for a human advisor over a robo-advisor
- Graph 22: attitudes towards human and robo-advisors, by household income, 2024
- A hybrid investing model is one that can provide the best of both worlds across advisory services
- Graph 23: attitudes towards hybrid advisor, by generation, 2024
- Consumer openness to banking with non-banks
- PayPal continues to garner the most consumer interest when it comes to account opening
- Graph 24: non-banks consumers would open a financial account with, 2021-24
- A third would open a financial account with Amazon
- Graph 25: consumers who would open a financial account with Amazon, 2021-24
- Beyond PayPal, Google and Apple boast significant interest from younger generations
- Graph 26: tech companies consumers would open a financial account with, by generation, 2024
- Apple is an established player in financial services that stands to capture the business of younger adults
- Graph 27: consumers that would open a financial account with Apple, by generation, 2024
- Walmart is best positioned at capturing the business of underserved, lower-earning brackets
- Graph 28: retailers consumers would open a financial account with, by household income, 2024
- Walmart is already well set up for future success in financial services
- Price, familiarity and superior digital experiences are the three main factors that would drive consumers to bank with non-banks
- Graph 29: reasons for interest in opening a financial account with a non-bank, 2024
- Banking with non-banks is more of a price-driven interest for older generations, while younger adults are more focused on digital capabilities
- Graph 30: reasons for interest in opening a financial account with a non-bank, by generation, 2024
- More than half of consumers would consider opening a credit card with a non-bank
- Graph 31: types of financial accounts consumers would open with a non-bank, by generation, 2024
- Consumers' interest in entry-level products with non-banks could spell trouble for legacy FIs
- Epilogue: consumers and non-banks
- Attitudes toward fintech
- Digital-wellness-based solutions can drive greater engagement among customers
- Graph 32: attitudes toward digital finance apps, by generation, 2024
- Trust in legacy FIs is significantly diminished among financially struggling consumers
- Graph 33: trust towards legacy FIs vs fintechs, by financial situation, 2024
- Leverage the power of partnerships to close the innovation gap
- Nearly 60% agree that credit scores should not be the main driver to obtaining financial products
- Graph 34: attitudes towards credit scores and access to financial products, by self-reported credit score, 2024
- Credit invisibility is not necessarily a mark of poor financial stature
- Graph 35: reasons for not having a credit card, by race, ethnicity, and financial situation, 2024
- Alternative underwriting has helped foster wider credit accessibility
- Moving towards a more-inclusive and equitable credit system will require strong investment from legacy players and governing bodies
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INNOVATION AND MARKETING STRATEGIES
- Marketing and advertising
- Google Pay adds Afterpay as a checkout option, with Klarna set to be available by 2025
- US Bank reminds customers about enabling biometric authentication as part of Cybersecurity Awareness Month
- Bank of America showcases the ways Erica can help customers stay on top of their finances
- Voice-assistants can add an enhanced layer of convenience for customers
- Graph 36: interest and adoption of virtual banking assistants, by generation, 2024
- Sezzle partners with the Timberwolves – a move that will elevate the BNPL provider's brand awareness
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APPENDIX
- Consumer research questions
- Consumer research methodology
- Generations
- Abbreviations and terms
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