Online banking isn't just for millennials anymore - it's quickly becoming the norm
- Americans of all ages are open to online-only banks, according to a survey by banking comparison site Finder.
- About 30% of Americans have an account or plan to open an account with an online-only bank, Finder found.
- Thanks to low overhead, online banks like Ally can offer financial products with relatively big returns like high-yield savings accounts.
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Dwindling are the days of brick-and-mortar banks and tellers behind counters. Now, banking is all about what happens on a screen, from traditional banks offering apps to online-only banks you'll never meet in person.
Looking at data from Finder's Neobank Adoption survey ("neobank" is the technical term for an online-only bank), it's obvious that digital banking isn't a niche market.
Online banking is just too convenient to ignore
Online banking isn't just for millennials anymore. About 30% of the US population has an account at an online-only bank or plans to open one, found Finder's survey. There are a few reasons why online-only banks like Betterment, Wealthfront and Ally have captured tech-savvy consumers: lower fees, higher interest rates, and perhaps most importantly, convenience.
Among all three generations, 57% of Americans surveyed said online banking offered a level of convenience they couldn't get at brick-and-mortar locations.
While younger generations are most likely to have on online-only bank account or plan to open one, the older generations are warming up to the idea. According to Finder, about 27% of millennials and 30% of Gen X said they had an account with an online-only bank, while about 8.8% of baby boomers said they had an account at one of these banks - and another 4.4% of boomers said they planned to open one.
While brick-and-mortar banks have to spend money to keep their branches open, online banks don't have that overhead. That means there's more money left to give customers higher interest rates on checking, savings, money market accounts, and certificates of deposit, and that fewer fees need to be charged to break even. This is why online banks like Ally can offer financial products with big returns like high-yield savings accounts - compare Ally's variable APY of about 1.7% to 2.2% to traditional banks' .01% to .1% - and why the bank branch down the street can't match that rate.
People don't switch if they're happy with their current experience
Americans are still banking with brick-and-mortar banks in large numbers, but apparently it's not because they don't trust online banks or need to talk to someone in person. Largely, it's because they're happy with the bank they already have.
When asked why they haven't yet opened an online-only bank account, 73% of Americans across all generations said that it was because they were happy with their current bank. Less than a quarter of millennial and Gen X respondents said they hadn't switched because they prefer to talk to someone in person, or because they don't trust online-only banks. Baby boomers feel slightly differently, with 35.7% preferring to talk to someone in person and 22.8% feeling distrust towards online-only banks.
But even people sticking with traditional banking are going digital.
Seven out of 10 Americans used a mobile app to manage their online banking information in September 2019, according to the American Association of Bankers' data. Americans have become even more open to using online platforms, with 34% of American adults saying they'd made an online payment or transfer through their bank in the past year, up from 29% in 2018.
Of people with bank accounts which have a mobile app or website, 75% said that they'd rate their online banking or app experience as very good or excellent. Just 5% rated their experience as poor or fair.
Online banking is here to stay.
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