New Galileo research shows that despite 77% of U.S. adults still using traditional banks, 43% of their funds are kept elsewhere, and 61% of consumers are somewhat or highly likely to switch to a digital-only provider
Galileo Financial Technologies, the leading global fintech-as-a-service platform owned and operated independently by SoFi Technologies, Inc., released new research, the 2021 State of Consumer Banking and Money survey, that demonstrates growing usage of different financial tools by consumers with all generations increasingly turning to digital banking options.
Gaileo surveyed 1,000 U.S. adult consumers (ages 18-64) to understand where they keep their money, and why and how they use their accounts across traditional banks, digital-only banks, prepaid cards and stand-alone digital options. Among the key findings: 21% of adults use a digital-only bank as their primary account and report greater satisfaction (79%) compared with the 65% of consumers who use a traditional bank as their primary account and report 66% satisfaction. What’s more, as digital banking proliferates, 77% of adults who use traditional banks as either a primary or secondary account keep 43% of their funds elsewhere.
The survey also revealed that despite continuing to choose traditional banks as their primary provider, consumers across all generations are utilizing non-traditional financial tools more than ever before and for more purposes. Consumers average 2.5 providers and use their primary accounts for ~4 activities and their secondary accounts for ~3 activities. However, the lines are blurring between uses across account types.
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“The financial frontier is rapidly and dramatically transforming right before our eyes,” said Seth McGuire, chief revenue officer at Galileo. “Consumers are looking for financial services experiences that meet them exactly where they are: on their devices, using various applications, accessing their money both traditionally and digitally, and doing more with their money. Across this industry there is a massive opportunity to bridge the gap among all consumers and deliver highly valued engagements for those who use traditional banking and those who prefer digital.”
Additional key report themes and findings include:
Where Consumers Bank Isn’t Always Where They Keep Funds
- 77% of consumers use traditional banks as a primary or secondary provider, but only 57% of consumer funds are kept there
- Of the 43% of consumer funds that are kept in non-traditional accounts, more than one-third (35%) are kept in digital-only banks and stand-alone digital accounts
Digital Providers Generate Greater Satisfaction and Interest Among Consumers
- Of the 65% of consumers who use traditional banks as their primary provider, only 66% are satisfied
- Satisfaction jumps to 79%, and 81%, respectively, for those who use digital-only banks (21%) and stand-alone digital accounts (7%) as their primary provider
- The majority of consumers (61%) indicated that they are somewhat or highly likely to switch to a digital-only bank
All Generations Are Embracing Non-Traditional Financial Services, But the 35-44 Segment Uses Digital-Only Banks Most
- More than one-third of all consumers (35%) utilize a non-traditional financial service (digital-only bank, stand-alone digital account or prepaid account) as their primary provider
- Across all age groups, 21% of consumers utilize a digital-only bank as their primary financial provider. When broken down by age, it’s not just Gen Z choosing digital first; older Millennials and younger Gen X consumers also are drawn more to digital-only banks as their primary providers:
- The highest usage (29%) for any age group is among consumers ages 35-44, which spans both the Millennial and Gen X generations
- 26% of 25- to 34-year-olds use digital-only banks as their primary provider, followed by 24% of 18- to 24-year-olds
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Consumers Use Traditional and Non-Traditional Financial Services for Similar Activities
- Although cash access is a popular use case for primary accounts (60%), when you look at usage across primary and secondary accounts, consumers consistently use traditional and non-traditional accounts for: paying bills, shopping online, savings and depositing wages
Security and Privacy Are Paramount Consumer Concerns
- While lower fees and convenience are priorities for 91% of all respondents, their importance ranks slightly lower than security of accounts and funds (96%) and privacy of personal information (93%)
Opportunities for Embedded Finance
- Nearly half of consumers say they would be likely to use a banking service offered through non-financial companies such as streaming providers (48%), internet or wireless providers (48%), employer (47%) and national retailers or warehouse stores (46%)
Galileo is hosting two webinars to dive deeper into the research findings. The first, on October 14, will cover consumer habits and usage across age and income demographics. The second on November 17 will go deeper into what motivates consumers to choose, switch and stay with a provider, and what drives satisfaction.
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