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Who Wants to Bank With a Digital Bank?

Recent news items report that European neobanks like n26 and Monzo have plans to the enter the US market. So who (in the US) wants to bank with digital banks like these?

The answer is practically nobody. When asked which FIs, or type of FIs, they'd consider if they were in the market for a new checking account, fewer than 10% indicated that a digital bank would be in their consideration set.

If you were looking for a new checking account, which of the following FIs (or type of institution), would you be most likely to choose from (select up to 3)?
Young Millennial (1988-1996)Old Millennial (1980-1987)Gen X
(1964-1979)
Boomer (1945-1963)
Bank of America43%49%32%21%
Wells Fargo35%30%26%18%
A credit union29%31%36%45%
Capital One26%28%29%23%
JP Morgan Chase23%28%23%22%
Citibank21%28%20%17%
A community bank16%15%26%28%
A large regional bank14%13%18%20%
US Bank13%14%11%8%
USAA12%12%11%12%
A digital bank7%6%9%7%
I don’t know6%3%4%7%
None of the above1%1%3%6%
Source: Cornerstone Advisors survey of 2,015 US consumers, Q3 2017

What might be more surprising is that Gen Xers and Boomers are just as likely as Millennials to consider a digital bank. That's because interest in digital-only banks isn’t driven by age-iit;s driven by one's confidence in their ability to manage their own financial lives.

If the European neobanks are going to invade the US banking market, who can they hope to steal customers from? Not the megabank's customers. Among the small group of consumers who would consider a digital bank the next time they were in the market, roughly a third (34%) of them currently bank with a community bank or credit union. Just three in 10 are with a megabank today.

What type of FI do you have your primary checking account with?
Consumers who would consider a digital bankConsumers who would not consider a digital bank
Megabank29%48%
Large regional bank21%18%
Community bank11%10%
Credit union23%15%
USAA3%2%
Digital bank5%1%
Other FI8%6%
Source: Cornerstone Advisors survey of 2,015 US consumers, Q3 2017

Here's something that shouldn't be surprising: Half of the consumers who would consider a digital bank want the best online and mobile banking tools. It's worth noting two things, however: 1) Almost as many want the lowest monthly fee, and 2) They're not much more likely than other consumers to want tools to manage their financial lives.

If you were looking for a new checking account, which of these would be most important to your decision (select up to 3)?
Consumers who would consider a digital bankConsumers who would not consider a digital bank
Best overall value for the money50%38%
Best online and mobile banking tools49%34%
Lowest monthly fee46%44%
Best rewards program32%27%
Most convenient bank locations31%41%
Best combined debit/credit card rewards18%18%
Best tools to help me manage my financial life17%13%
Best mobile payment tools and capabilities16%15%
Recommendations from friends and/or family8%11%
Best in-branch experience7%14%
Best P2P payment tools5%5%
Best international money transfer capabilities2%5%

Unless they've got some tricks up their sleeve that I'm not aware of, the European neobanks coming in the US are going to find the going tough. Even US-based neobank Moven is considering acquiring a bank in order to establish a physical presence.

Ron Shevlin
Director of Research
Cornerstone Advisors

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