Data shows challenger banks by and for underrepresented communities, or affinity banks, are becoming increasingly popular and gaining market share from incumbent banks
Deloitte Digital, the experience consultancy, announced the findings of a study exploring the intersection of digital banking and financial inclusion and the role banks should play in addressing inequities.
The evolution of digital banking is pushing financial services to catch up with society’s demand for representation. The rapidly increasing numbers of affinity banks — challenger banks founded by and for the underrepresented — are closing this gap and putting pressure on incumbent banks to transform how they operate.
Affinity banks are differentiated by their value-driven design, and the credibility and agility to expand their services beyond transactional banking. There are now over 30 affinity banks in the market, specifically designed to serve underrepresented groups who share common values and identity drivers such as race, ethnicity, gender, sexual orientation, vocation and sociopolitical beliefs, among others.
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The report, “Affinity Banking: The intersection of digital banking and financial inclusion,” explores the continued shift from incumbent banks to digital challengers as underrepresented groups look for new places to put their money. It also underlines the need for financial institutions to address and improve equity issues or risk losing market share and brand strength.
Key findings from the report include:
- Sixty-six percent of Americans believe banks have a responsibility to support diverse and underserved communities.
- One in 6 Americans still feel unwelcome purchasing banking products due to their race, gender, socioeconomic status, or sexual orientation.
- U.S. consumers are now 2.6 times more likely to transact with banks associated with high humanity.
- Thirty-one percent of Americans are interested in switching to a bank that supports diverse and underserved communities.
- Black and Hispanic customers are 44% more likely to select a bank based on personal values compared to the average customer.
“As shared values become the influencing factor in consumer decision-making, we expect to see affinity banks continue to rise in popularity,” said Nick Cowell, senior manager, Deloitte Consulting LLP, and digital strategy specialist and affinity banking lead at Deloitte Digital. “We believe the shift from incumbent banks to digital challengers is expected to continue as underrepresented groups look for new places to put their money.”
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The report concludes that as consumers continue to seek out products and services that better reflect their identity and affinities, incumbent banks risk losing up to 10% of market share to the flourishing affinity market if they don’t take proactive steps to seriously serve underrepresented groups.
“Expectations have never been higher for financial institutions to address and improve equity issues,” said Julius Tapper, manager, Deloitte Consulting LLP, and head of inclusive innovation for Ethos at Deloitte Digital. “To maintain market share and brand strength, incumbent banks must realign brand purpose and profit to create newly inclusive offerings that benefit their customers and communities and improve equity issues, aspiring to a higher bottom line.”
Deloitte’s 2022 Banking Survey was conducted in January 2022 among over 2,000 respondents across the U.S.
Deloitte Digital helps companies create new growth by elevating the human experience — with connected ideas, technology and talent. Our ambition is to make the best customer-oriented organizations in the world. Alongside all of Deloitte, we foster the connections necessary to shape a better future for our clients, our culture, our society and our planet.
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