The surge of digital banking is evident as it encompasses various banking tools and trends. A significant number of Americans have utilized digital banking services over the past year, and numerous banks are introducing innovative digital tools like mobile apps and automated savings features.
As digital banking continues to gain momentum, there has been a decline in the presence of traditional banks with a 9 percent decrease in branch numbers across the country in recent years. While traditional banks provide access to branches, digital banks, offering online and mobile banking services exclusively, offer appealing yields and low or no bank fees.
To stay informed about the latest digital banking trends in 2023 and compare them with traditional banking statistics, read on.
Key statistics on digital banking
- About 60 percent of consumers say they are very or somewhat interested in using a digital bank in the next year.
- The generation most interested in digital banking is millennials (79.3 percent), while baby boomers are the least interested (33.8 percent).
- Of those who are interested in digital banking, 43 percent say their primary motivator is to have improved transfers; 33 percent want lower costs, the second-most cited motivator.
- Branches aren’t obsolete yet — of those who prefer online or mobile banking, 79.9 percent still visited a branch in 2019.
- About 27 percent of Americans use an online-only bank.
- Of those at online-only banks, 88 percent reported they are satisfied with the bank’s services.
- Meanwhile, only 66 percent of consumers using traditional banks report being satisfied with them.
- When it comes to banking satisfaction, 37 percent of consumers say no or low monthly fees is the most important feature they look for in a checking account — making it the top-cited feature.
- Around 5 percent of Americans are unbanked, meaning they have no bank accounts.
Comparing Traditional Banking to Digital Banking
Traditional banks are brick-and-mortar establishments with a physical presence, and some of the largest U.S. banks, such as JPMorgan Chase and Bank of America, fall under this category. On the other hand, online banks offer their services exclusively through desktop websites and mobile apps, without any physical branches.
According to a study by fintech company Galileo, 65 percent of consumers use traditional banks as their primary bank accounts, while JD Power reports that 27 percent prefer online banks. However, out of the 65 percent who primarily use traditional banks, 77 percent disclosed that they keep some of their funds in other places.
To gain a better understanding of the variations between traditional and online banks, as well as the advantages of each, let’s delve deeper.
| Traditional banking | Digital banking | |
|---|---|---|
| Services | Primarily branch banking, though some may also offer online accounts | Primarily online and mobile banking |
| Common savings account interest rates | 0.01% – 0.02% APY | 3.00% – 4.40% APY |
| Share of consumers’ primary accounts | 65%* | 27% |
| Advantage(s) |
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| Disadvantage(s) |
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Traditional banking trends
Although traditional banks that have physical branches remain the primary financial institutions where people keep their primary bank accounts, their popularity is decreasing.
Over the last four years, there has been a decline of 9 percent in branch locations, resulting in the closure of approximately 7,500 branches, as per the National Community Reinvestment Coalition (NCRC), a nonprofit organization. A third of these closures were in low- to moderate-income or historically marginalized neighborhoods, with the COVID-19 pandemic doubling the rate of closures.
Online banking has impacted traditional banking positively, prompting many to change their approach to remain competitive. One of the most significant changes in traditional banking has been the reduction or elimination of overdraft fees, with banks such as Citibank, PNC Bank, and U.S. Bank taking this step.
Most large traditional banks now offer comprehensive mobile apps, enabling customers to perform basic transactions such as checking account balances, transferring funds between accounts, and making mobile check deposits. Advanced features like automatic savings options are also available in some of these apps, and some banks offer account opening bonuses to entice new customers.
Although traditional banks offer services through a bank teller, a preference seen more often in older generations than in younger people, in-person services continue to be a standard feature of traditional banks. Here’s a comparison of how different age groups access their accounts according to 2021 FDIC data.
| Age group | Percent who primarily use in-person banking services |
|---|---|
| 15-24 | 4.1% |
| 25-34 | 4.8% |
| 35-44 | 6.3% |
| 45-54 | 9.9% |
| 55-64 | 16.5% |
| 65+ | 30.5% |