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Why big banks are losing market share with younger generations: A report finds fintechs and neobanks have captured 47% of all new checking accounts opened in 2023, and that Gen Zers increasingly see them as their primary accounts.

US digital-only account openings will remain flat at just 200,000 every year from 2024 through to 2027, according to our forecast. Traditional account openings, however, will hover at 5.0 million and above during the same period.

On today鈥檚 podcast episode, we examine how banks build and use trust to win new customers. Here鈥檚 a look at what we鈥檙e talking about: 鈥� In our 鈥淗eadlines鈥� segment, we discuss recent data breaches at banks and question what the difference is between a bank's security breach and a breach at a partner company鈥檚 system. 鈥� In 鈥淪tory by Numbers,鈥� we focus on personalization and reveal if it successfully engenders trust or just seems creepy. 鈥� In 鈥淔or Argument鈥檚 Sake,鈥� we ponder what would happen if banks were required to report to customers when they shared their personal information with third parties and how it would impact customers鈥� trust and banks' marketing campaigns. Tune in to the conversation with host Rob Rubin and our analysts Grace Broadbent and Tiffani Montez.鈥� In our 鈥淗eadlines鈥� segment, we discuss how in-flight deposits and Gen Z will drive account openings in 2023 and to what extent new account openings are the result of high deposit rates and an incentive-laden environment. 鈥� In 鈥淪tory by Numbers,鈥� we examine how being able to set up direct deposit when consumers open checking accounts is extremely important and the importance of deposits being protected. 鈥� In 鈥淔or Argument鈥檚 Sake,鈥� we suppose there鈥檚 a new US banking regulation requiring all banking products to be applied for and opened online. We debate (nicely) how the industry dynamics would change if everything in banking were digitized and moved online. Tune in to the conversation with host Rob Rubin, managing principal of financial services consulting at EPAM Systems Alex Jimenez, and our analyst Tiffani Montez.

Prioritize digital account opening and customer onboarding. Smaller FIs are playing catch-up with their larger counterparts. In a 2022 Cornerstone Advisors survey, 32% of credit unions said they planned to invest in or replace their digital consumer account opening solution in 2023.

After peaking at 4.2% in December 2021, the percent of US consumers with a newly opened credit card account had fallen to 3.2% as of July 2024, per VantageScore鈥檚 CreditGauge. Across the rest of the payments industry, firms have found ways to do more with less. Klarna, for example, plans to cut roughly 2,000 positions鈥�50% of its staff鈥攁s it ramps up generative AI (genAI).

Many digital-first banks and financial apps have minimal identification requirements, making it easier for people without traditional documents to open accounts. And alternative banking services like PayPal, Cash App, and Venmo have allowed customers who may not have qualified for bank accounts鈥攐r who have felt intimidated by account-opening processes鈥攖o use basic banking services.

Gen Zers and cashless consumers will drive account openings. Credit cards must draw a new line in the sand on buy now, pay later (BNPL) encroachers. BNPL players are launching paid subscription models that promise rewards and no additional fees. This could siphon customers away from credit card programs that skew to subprime and deep subprime customers.

But respondents reported issues with the quality of banking services, noting poor problem resolution, difficult account opening processes, and limited functionality in automated phone and digital services like email, web forms, and in-app messaging.

Key takeaways: NYCB has attempted various maneuvers to encourage deposits and account openings since its tumult began鈥攊ncluding offering the highest APY savings account in the US. It makes sense to rebrand to rebuild customer trust, but its strategy risks cutting off an important source of income after the bank has struggled to instill confidence in its investors.

Diving into card growth: Card fee revenues jumped up 18% YoY thanks to higher spend and account openings from Gen Z and millennials. Card spend increased 6% YoY. Growth was even across both goods and services (G&S) and travel and entertainment (T&E). We forecast Amex鈥檚 full-year card transaction value will increase 10.4% YoY.

Adding a consumer鈥檚 BNPL use had generally the same effect on their credit score as opening a new account. Why this matters: Credit reporting has been at the center of the global BNPL regulatory debate. Proponents argue the lack of transparency into consumer BNPL indebtedness鈥攕o-called phantom debt鈥攄istorts issuers鈥� perception of consumers鈥� financial health.

A new type of tax-advantage account making its way through Congress could be a chance for banks to attract and retain customers.