A survey commissioned by Plaid found that customers handled the coronavirus-imposed transition to digital channels gracefully — and they’re using mobile apps from traditional banks and fintechs at an accelerated rate.
Sixty percent of the 2,000 U.S. adults participating in the survey, conducted by Harris Poll, said they were using more apps to manage their money than they did before the pandemic. And 56% said they could not have coped with their finances without such apps.
“We had a hunch as COVID was starting up that we were going to be seeing a rise of consumer engagement with fintechs across the board, for obvious reasons such as people can't go to branches anymore, people have more time on their hands, and people have more uncertainty,” said Lowell Putnam, Plaid's head of partnerships.
The Paycheck Protection Program also blew a tailwind fintechs’ way, he said.
The pandemic “is putting an urgency and a value on fintechs that I think historically we haven't seen before,” Putnam said. “It's easy to dismiss fintech applications as secondary or tertiary or backup or hobby applications for people who are really into managing their money. But what we're seeing here is this is a critical lifeline.”
More than half of the respondents said they plan to use three or more apps to manage their money, and 14% said they rely on six or more apps.
“This seems to be the new behavior pattern that's emerging from consumers and it seems to be sticky,” said Putnam, the founder and CEO of Quovo, which was sold to Plaid last year.
Plaid in turn has agreed to be sold to Visa. That deal is expected to close in November.
“Despite so many of the tragedies that have come out of COVID, it really has become a catalyst for behavioral change in consumers when it comes to fintech utilization across all the metrics that we tracked,” Putnam said.
In addition to using apps for basic banking, consumers are exploring newer fintech applications.
A third of respondents said they use apps more for investing than they did before the pandemic. About 30% use apps more for paying off student loans or personal debt, while 29% said the same for securing or refinancing loans.
“The playing field has now been leveled in an incredible way,” Putnam said. “If a branch's geographic location is no longer a major advantage, smaller regional banks can from their local geography with a great brand and a well-run financial institution reach across the entire country with a digital-first mindset.”
Big banks have also reported a rise in adoption of their mobile banking apps, which are backed by large teams of developers and designers.
“There are very few banks, even in the top five or top three, which can offer every single product to every single customer,” Putnam said. “What I see happening is smaller banks taking a digital approach and using partnerships with other applications or other innovators that allow them to move a heck of a lot faster than a Chase or Bank of America.”
Consumers surveyed say they plan to stick with their new habits.
About three-fourths of the repondents said they will keep managing the majority of their finances digitally, viewing fintech as the “new normal.” And 80% of Americans say they can manage their money entirely without a bank branch, expressing a preference for contactless digital solutions.
