An Opening for Bank Disruptors?

The new high-yield savings account offering was a huge hit, attracting more than $1 billion in consumer deposits in just four days. But the enticing new product didn’t come from a traditional banking firm. It came from Apple. 

In the wake of yet another financial crisis, Apple, Chime, and other disruptors to traditional banking see an opportunity to steal customers and market share. Apple announced its savings account offer, which yields a 4.15% interest rate, only last month; already 240,000 iPhone users have opened accounts. This figure represents just 0.2% of the roughly 120 million iPhone users in the US, meaning it’s possible that tens of millions of people could ultimately move their money from a traditional savings account to one with the technology giant.

Jamen Graves, global co-leader of CEO and enterprise leadership development at Korn Ferry, expects to see a surge in new products and services offered by fintech startups and established disruptors to banking like Apple, Amazon, and even Walmart. “This is a chance to get closer to their customers and displace traditional banking services in the process,” says Graves.

This isn’t a reprise of the financial collapse of 2008; the big banks are playing the role of saviors rather than the villains this time around. But the credibility of the entire sector has taken a hit—again. According to a new Gallup poll, roughly half of Americans surveyed are worried about the safety of the money in their traditional bank accounts, a level of fear comparable to that caused by the financial crisis 15 years ago. 

Fintech companies like Chime and Ally are looking to capitalize on that mistrust. Deepali Vyas, global head of the FinTech, Payments, and Crypto practice at Korn Ferry, says she’s noticed the prominent messaging in advertising and marketing proclaiming that these accounts are, like those in a traditional bank, insured by the federal government up to $250,000. It may seem like a small or obvious detail, but Vyas says it speaks to the level of transparency and dialogue fintech companies have with their customers, as well as how “they speak to them differently than traditional banks do.” These fintech firms may also be benefiting from what Gallup, in its latest survey, calls “a lack of awareness of the protections for small [traditional] accounts.”

But it isn’t trust alone that’s leading consumers to seek non-traditional banking alternatives. Vyas says the uncertainty and volatility of the current economic environment works in favor of banking disruptors. “People are looking for a safe place to park their money,” she observes, and they’re attracted to the seamless, frictionless, and—most importantly—safe interactions offered by fintech platforms. Chime’s customer base is projected to grow from around 13 million today to 25 million over the next two years.

As with past financial crises, however, the window of opportunity for banking disruptors is brief—leaders of traditional financial-services firms are very good at quickly restoring credibility and trust, as well as unusually adept at operating in an environment of perpetual consumer skepticism, says Chad Astmann, co-head of global investment management at Korn Ferry. “The general memory of investors and consumers isn’t that long,” says Astmann. “The average citizen usually loses interest as soon as they are assured of getting their cash.”

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