Digital Banking: Fintech Challengers in the US Grew Customer Base by Nearly 40%, UK Digital-Only Banks Report Growth as Well

With digital or neo banking gaining more users and popularity during the Coronavirus pandemic, the leading challenger banks in the US and Europe recently confirmed steady growth and adoption.

Trading Platforms reveals that seven US or American challenger banks managed to record a combined user base growth of nearly 40% (from around 28 million users to 39 million customers  between 2019 and 2020).

US-based digital bank Chime, which currently leads the challenger banks, saw its client base grow from 8 million to 10 million in only a year. Meanwhile, Acorn saw an increase from 6.2 million to 8 million customers, and neobanking platform Dave’s user base grew from around 5 million to 7 million in just the past year.

The Trading Platforms team noted that the solid growth may be due (at least partially) to the Covid-19 outbreak, adding that some traditional lenders weren’t quite prepared for the unprecedented challenges of 2020, because they’re still relying on outdated legacy tech infrastructure.

Personal finance comparison site Finder reveals that 27% of UK residents now maintain an account with an all-digital banking platform, which is up slightly from around 23% back in 2019.

Approximately 17% of UK citizens are now planning to open an account with a challenger bank in the coming years, with 11% saying they intend to do so this year (in 2021). This might mean that around 45% of UK consumers may have an account with an all-digital challenger by 2026.

The main reason given for maintaining an account is the extra convenience that all-digital banks can offer, for the third year (26%). The second-most cited reason for banking with a digital challenger was users requiring an additional account and managing a digital one appeared to be the most convenient option for 20% of consumers. Digital banks have also become popular because around 20% of customers think that it’s a lot easier to transfer funds when using these more agile platforms.

Consumers who like carrying trendy cards are also leading to many more signups, with 1 in 10 existing, or future, clients claiming this as a reason to open and maintain an account with a digital bank.

Although the growth in the number of all-digital banking clients has been steady, the number of consumers who aren’t considering one has also increased. During 2020, around 23% of survey respondents stated that they aren’t really considering opening a digital-only bank account. Notably, this number increased to 42% in the most recent survey.

This seemingly good news for incumbents appears to be consistent with research from App Annie, which reveals that NatWest, Lloyds and HSBC have all managed to rank in the top five list for finance or Fintech app downloads in the United Kingdom during 2020, outperforming most financial technology startups.

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