Consumers Changing the Meaning of Banking Convenience

A new survey suggested consumers are changing the meaning of banking convenience from branch locations to the digital capabilities of financial institutions.

The apparent driving force for consumers to open an account with a direct bank, otherwise known as a digital or online financial institution without branches, is convenience, instead of lower fees and better interest rates.

Nineteen percent of consumers reported convenience as the most important factor when opening an account with a direct bank, according to a survey of 600 consumers conducted by BAI, a Chicago-based nonprofit independent organization that serves the financial services industry.

Fourteen percent of consumers indicated better rates and 10% said lower fees would be factors in deciding to move their business to a direct bank.

For consumers, improved apps and digital capabilities that facilitate this convenience factor means a clear and easy to use app for check deposit and bill pay, faster money transfers, faster payments and 24/7 customer service.

“The way consumers define ‘convenience’ is rapidly changing from branch location to digital capabilities,” Karl Dahlgren, managing director of research for BAI, said. “Direct banks aren’t going away any time soon, and traditional financial services organizations should continue to view them as a real competitor,”

While the majority of participants use a large bank (52%) as their primary financial institution, 19% use a direct bank, 16% use a community bank or credit union, and 13% use a regional bank.

What’s more, when consumers were asked if they anticipate using a direct bank as their primary financial institution in the next 12 to 24 months, 24% of Gen Z consumers and 21% of millennials answered yes. Only 11 % of Gen X and 10% of boomers said yes.

Nearly 50% of deposits that went to direct banks came from traditional financial institutions, the BAI survey found.