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2021 Is the Year Banks Must Take Digital Challengers Seriously

March 4, 2021|0 min read
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In a recent Forbes piece, Ron Shevlin, Managing Director of Fintech Research at Cornerstone Advisors, outlines the results of an original study from Cornerstone. 

One particular trend from the study should sound the alarm for traditional bankers everywhere. “In January 2020, just 4% of Gen Zers and Millennials considered a checking account from a challenger bank their primary account,” Shevlin writes. “By December 2020, that percentage had grown to 15%.” 

That growth rate — nearly 3x in under a year — was likely propelled in part by the COVID-19 pandemic and the decreased desire many people feel about venturing to a bank branch. For instance, our primary consumer research in the Ultimate Guide to the New World of Banking shows that 36% of people say they don’t plan to go into the branch as often as they did before the pandemic, even after all restrictions have been lifted.

These branch-wary sentiments almost certainly represent a sustained shift toward increased digital banking use and not just a passing trend. As Parker Conrad, Rippling’s co-founder and chief executive, asks, “Who wants to go back to filling out insurance paperwork with a pen and trying to find a fax machine? No one.” Likewise, as more people realize how many of their typical banking processes they can do via a digital device, the desire to return to physical methods (such as signing a bunch of paperwork) will diminish. It’s no wonder that the global research team at CACI estimates that by 2022, 88% of all interactions at banks will be mobile.

What’s perhaps even more worrisome for traditional banks is that Cornerstone also found that two-thirds of customers at the biggest digital fintech challenger, Chime, call this challenger their primary bank. 

This places Chime high on the list — just barely behind Citi — of institutions with the most people in the U.S. who call it their primary bank.

challenger banks

If Chime were just another traditional player on this list, that would be one thing. But given that they’re a player who saw a 3x increase in young customers in under a year, it doesn’t bode well for traditional players — particularly those players who don’t have a solid digital strategy that can win over future generations. 

To win these future generations, many institutions will continue to find that they must partner with fintech providers who can give their customers (especially their Gen Z customers) a digital experience that competes with upcoming challengers. Without help on the digital front, it’s bound to only become more difficult to retain the edge that traditional players have held in this space. Fortunately, there are many fintech companies, including MX, that partner to help traditional banks offer a customized mobile banking experience that wows customers.

To learn more, read the Ultimate Guide to Mobile Banking.

guide to mobile banking

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