How US Consumers Changed Their Banking Preferences

Optherium Labs
4 min readFeb 1, 2023

Over the past 12 months, many bank clients have become much more at ease with digital interactions, which has resulted in decreased branch visits. What would happen to retail banks if they never returned?

Investing in mobile banking is hard to evaluate in terms of ROI. Although most retail banks recognize that digital and mobile banking services are an essential expense of doing business, the value these technologies offer is hazy and challenging to quantify.

Regardless, consumers continue demanding digital banking services, and it’s very unlikely that this trend will stop soon.

More and More Consumer Prefer to Bank Digitally

There’s currently a sizable and expanding client sector that’s not at all interested in physical bank branches. These are digital native consumers who prefer to skip branches entirely and instead be actively engaged online. According to PWC’s study on digital banking, they now make up more than 32% of total banking users.

This is a significant increase from 26% at the beginning of 2020. Consumers who are mostly engaged digitally but like the option of visiting a local branch had a significant and counterbalancing reduction. Many of these customers stopped visiting physical branches altogether this year or, to a lesser extent, do the majority of operations online and visit branches only when there’s something they don’t know how to do online.

Two Types of Banking Consumers

PWC, in their study, defined two types of consumers right now. Consumers who are “phygital” — active customers who both utilize digital apps and visit physical branches. And the second type is those who are branch-dependent and prefer to visit physical stores.

In the US, 25% of customers now identify as “phygital,” up from 17% a year ago, due to this expanding digital comfort and accessibility.

As more consumers have gotten accustomed to using the web and mobile apps, this shift neatly reflects the decline in branch-dependent users, who now account for 35% of the total user base (down from 42% before the epidemic).

Of course, another category of people prefers to bank only digitally, but these are mainly innovators who use neobanks and challenger banks.

Digital Banking Leads to Loyalty

Did you know that, on average, bank clients who utilize digital banking spend more and adopt more bank products? Not to mention, digital users enroll in far more product holdings such as loans, refinancing, and credit cards.

Bank of West partnered with Fiserv to study an audience of 6000 clients and determine how digital banking affected the behavior of users. In the study, they found that:

  • The average holdings of clients increased by 58% after having enrolled digitally. The growth of non-digital users for the same period was negligent.
  • The revenue generated per client increased by more than 10%. Monthly revenue per client grew 10.7% after signing up for digital banking versus a 4.5% growth for non-digital customers over the same time period. And greater engagement resulted in greater value. In the study, after digital enrollment, average monthly revenue increased by 13% among highly engaged clients. According to the survey, highly engaged consumers are those who stay with a company the longest, conduct the most business, and bring in the most money.
  • Digital users had an increased transaction activity. After digital registration, the study observed a 12% rise in credit transaction volume and a 12% growth in transaction frequency, compared to barely detectable increases for non-digital users. Similar outcomes were seen for debit activity: a 14.6% rise in volume and a 9.3% debit transaction increase.
  • Decreased attrition. Compared to non-digital users, digital banking customers were 35% less inclined to leave the bank for good.

Going Digital is a Must

With the constantly growing percentage of digital and “phygital” banking users, Statista estimated that only in the US is it estimated that digital banking users will reach 217 million by 2025. As a bank, you’re most likely to lose customers if you cannot serve one-third of the country’s population.

The easiest way for brick-and-mortar banks to transition into the digital world is by partnering with third-party neobank-as-a-service providers that offer turnkey solutions which can, in the span of a couple of months, digitize the processes and offer them a working digital banking application, on par with modern neobanks.

The banking environment has never been so dynamic and quick-paced. Neobanks have disrupted clients’ expectations, and now they want to be able to digitally bank comfortably from the palm of their hands.

Final Words

If you’re willing to reconsider geographic restrictions and are prepared to expand upon the skills and specialties you already possess, there’s still time to adapt. In fact, PWC’s study indicates fresh potential for organic development. Customers have already settled into new purchasing habits in the wake of the pandemic, which will have long-term effects. This can be a great opportunity for both banks and neobanks alike.