There’s a new fashion trend going on out there, but it might be one that’s hard to see–it’s people accessorizing their bank accounts.
For years, fintech startups have boasted of coming into the market and “disrupting” (i.e., displacing) traditional banks. That hasn’t happened.
Instead, what’s happening is that consumers are using new tools from fintech startups in conjunction with their existing bank accounts. These new tools help consumers:
- Optimize their savings. Tools like Digit and Qapital won’t help you get a better rate on savings, but they can help you save more money. Digit analyzes users’ spending behavior, determines how much can be safely saved, and then automatically transfers small-dollar amounts from users’ checking accounts to Digit-managed accounts. Consumers have opened more than seven million automated savings “accounts” and used them to save nearly $6 billion in 2018.
- Reduce their bills and negotiate fees. Truebill and Trim both promise to reduce consumers’ monthly bill payments by helping them identify and cancel unwanted subscriptions and get them refunds on fees and outages. Cushion and Harvest provide AI-based tools that identify bank fees and negotiate on behalf of consumers to reduce or eliminate the fee.
- Get better interest rates and rewards. Although digital banks like Ally, Chime, and Varo pitch themselves as alternatives to traditional banks, most of their users accounts open accounts with the firms to get better interest rates or better debit card rewards–and keep their existing bank accounts open.
Oxford defines the word accessorize as “provide or complement with a fashion accessory” which accurately describes how consumers are using fintech startups in relation to their primary bank accounts.
Consumers Want Accessories From Their Banks
A new study from Cornerstone Advisors shows strong interest among consumers to get checking account add-ons and accessories from their existing banks, however, in categories like:
- Digital services. Many consumers already have–and pay for–services like cell phone damage protection, identify theft protection, and data breach protection. Three-quarters of Millennials said they’d be interested in getting cell phone damage protection bundled with their checking account from their current bank, and six in 10 said the same thing about identify theft protection and data breach protection.
- Fuel rewards. Just over half of consumers belong to fuel reward programs. Consumers could be motivated to make more use of their financial institutions’ debit cards, however. A little more than half say they would pay with a debit card instead of a credit card in order to get a 10-cent discount on gas. In addition, 11% of Millennials in their 20s would even open a new checking account in order to get that discount.
- Purchase-related services. Purchase protection plans and extended warranties have been around for a while, and nearly one in five consumers pay for these services. Among the Millennials who have–and pay for–these services, roughly 40% expressed interest in getting purchase protection plans from their bank, and a third said they’d entertain the idea of getting subscription-cancelling services from their financial institution.
Banks Need to Accessorize Their Checking Accounts
Although 94% of US households have at least one checking account, today’s reality is that the product isn’t as important in consumers’ financial lives as it used to be. Checking accounts have become paycheck motels: Temporary places for people’s money to stay before it moves on to bigger and better places.
Consumers’ behaviors and attitudes show that they:
- Don’t see enough value in today’s checking accounts, and feel the need to turn to accessories to get more value, but…
- Are willing to pay for accessories if they see the value in them, and are willing to get them bundled with a checking account from their existing banks.
Fintechs may be providing bank account accessories today, but it’s easy to see how they could become the primary provider in the near future.