Mobile banking trends

Traditional banks are no longer dominating the percentage of new checking accounts that are being opened, as new digital players and fintechs gain ground in the battle for the type of accounts long viewed as the anchor product of a consumer’s financial relationship.

That’s according to survey data gathered by management and technology consulting firm Cornerstone Advisors, which found that digital banks and fintechs made up nearly half (47%) of all new checking accounts opened so far in 2023, up from 36% in 2020.

Over the same period, the share of checking accounts opened at the nation’s largest banks dropped from 24% to 17%, while regional lenders’ share declined from 27% to 21%, according to the survey. Community banks’ and credit unions’ share of new checking accounts remained flat at 12% during the period.

But despite the gains that fintechs and digital banks have made in recent years, consumers aren’t ready to completely ditch their accounts with traditional banks, said Cornerstone Advisors Chief Research Officer Ron Shevlin, who broke down some of the survey’s findings in a Forbes article.

That’s due to consumers’ evolving attitudes toward defines a primary financial institution, he told Banking Dive.

Of the consumers who opened a checking account in 2022 or 2023, nearly one-third said they have more than one checking account, according to the survey.

“The idea of a primary financial institution is a meaningless thing, because [Gen Z and millennials] have so many financial relationships,” he said. “Their financial relationships are not just with providers of accounts, but providers of tools.”

Many fintechs offer tools that legacy banks lack, Shevlin said. And boosted by the growth of third-party platforms like MX and Plaid that enable easy money movement, customers are willing to spread their funds across a variety of accounts in order to craft a financial cocktail that fits their needs, Shevlin said.

“It's relatively frictionless. It's nothing to a consumer to have their direct deposit with a traditional bank like Bank of America, and then on a weekly basis, move a bunch of it to Chime to do some payments, to Starbucks to pay for coffee, or to Robinhood to do some investments,” he said.

The growing disintermediation of consumers’ financial footprints is challenging traditional banks to rethink the checking account product, Shevlin said.

“The traditional thinking was that the checking account was the anchor product of the relationship,” he said. 

Many banks have viewed the checking account relationship as an opportunity to springboard to other products and services, and have stopped charging monthly fees, Shevlin added. 

“That might have been true 30 years ago, but it sure as hell has not been true for at least the past 10 years,” Shevlin said. “It's a pricing issue on the part of the traditional financial institutions, and it's a product challenge as well.”

But certain factors are still giving traditional firms an advantage, and may be keeping consumers from completely ditching their relationships with a legacy bank, Shevlin said.

The ability to walk into a bank branch to resolve an issue in person is still considered an important reason to maintain an account with a brick-and-mortar institution, Shevlin said.

Consumers may also have safety concerns and could be wary of banking entirely at a startup neobank, even if deposits are insured through the fintech’s sponsor bank, he said.

Still, financial institutions can’t ignore the fact that consumers are increasingly willing to move money around a mix of platforms in order to access the tools and features they want, Shevlin said.

“There's reasons why they maintain that traditional bank relationship, but they're going to the new ones because there's some feature functionality or some product aspect that they're looking for and want to get,” Shevlin said.

While only a fraction of Americans opened new checking accounts this year (14%), that number is growing, according to Cornerstone’s research. 

In 2022, 15% of consumers said they opened a new checking account. That’s up from 12% in 2021 and 10% in 2020, according to the firm’s survey results.

Citizens Bank of Edmond CEO Jill Castilla’s latest venture combines two key elements of her professional life: financial services and the military.

For the past several years, the bank executive and military veteran has been building a national digital bank that aims to address some of the banking pain points that Castilla herself encountered when she enlisted in the Army at 19. 

“There's still this deficiency in the market where there's not a focus on that new service member coming in,” Castilla said. “They're very targeted from a predatory lending standpoint.”

Through Roger, a digital bank which officially launched in August, Castilla is hoping to reach entry-level recruits who all too often start basic training without bank accounts.

“They are coming to basic training, 50% or more across every service, without having a banking relationship,” she said. 

The lack of early access to a bank account can delay a new recruit’s first paycheck, or even push back their training start date, Castilla said.

Roger aims to work with military recruiters to provide new service members with an instantly available direct deposit form that is compliant Defense Department regulations, Castilla said. The form populates all of the prospective service member’s information, as well as a signature by Castilla as the bank’s CEO.

“All they have to do is either text that, email, or print it out and provide it to either the recruiter or to reception at basic training,” she said.

Roger also allows 17-year-olds that have signed enlistment papers to be able to open an account without a cosigner.

“That’s another big hurdle that we're excited to be able to remove for young people that are serving but may not be 18,” Castilla said.

‘Cracks in the system’

According to the Consumer Financial Protection Bureau, U.S. service members are increasingly becoming targets of predatory lending and falling victim to payments app scams. 

The Defense Department has identified predatory lending and poor financial literacy as serious threats to military readiness, Castilla said.

“It’s recognized, from a mental health standpoint, as well as deployment readiness by the Department of Defense, that financial stability and financial literacy is critical to ensure both the servicemembers and their families are well educated and protected when it comes to their finances,” she said. “We have laws in place to protect service members from exposure to potentially predatory lenders, unfortunately, cracks still exist in the system, that don't fully allow that barrier from someone taking advantage of a service member being deployed.”

One of Roger’s fraud protection features includes “deployment mode” where a service member can lock down some of the access to their debit card or enable increased fraud monitoring during a tour.

A common cause

Castilla said a couple hundred users, made up of both military veterans and National Guard members, have been testing the platform ahead of its official launch.

Existing staff at Edmond, Oklahoma-based Citizens Bank of Edmond have been tapped to work on Roger, Castilla said. The firm also added retired Army Brig. Gen. Andy Preston as Roger’s director of military banking.

Castilla said “several $100,000 of hard expenses” as well as the equivalent of $1 million in staff time has gone into the launch of Roger.

Roger has a stand-alone core powered by banking technology firm Nymbus.

Castilla said Nymbus has offered to work with Citizens to make its technology more accessible “all for this common cause to help the service members that typically have been underserved.”

Varo Bank customers can now send funds to anyone with a U.S. bank account, the company announced in September, part of a new feature called “Varo to Anyone.”

The feature allows Varo account holders to instantly transfer funds at no cost to anyone with a U.S. debit card, the company said. 

After inputting a recipient's U.S. phone number or email in the Varo app, the recipient will get a text or email notification about the payment with instructions on receiving their funds.

They can instantly transfer the money for free to their bank account by entering their debit card information in Varo Bank’s portal, according to the firm.

“It's all operating on our secure platform,” said Colin Walsh, CEO of Varo Bank, which in 2020 became the first neobank to be granted a national bank charter by the Office of the Comptroller of the Currency. “As an OCC regulated bank, we are subject to a lot of scrutiny. The recipients have to come onto our platform to claim the funds, so it's a really secure way of moving money.”

The feature is the third iteration of Varo’s peer-to-peer payments offerings. “Varo to Varo” allows the bank’s customers to send funds to other Varo account holders. Varo customers also have access to Zelle, the bank-owned P2P payments network that allows for money transfers to other bank account holders with Zelle access.

But despite having access to the aforementioned payment methods, many Varo customers still use third-party payment apps to send money, Walsh said.

“Almost 3 million transactions a month … were going through peer-to-peer rails like Cash App, Venmo and PayPal,” he said.

Walsh said he hopes Varo’s latest P2P feature will displace some of the payments volume going through third-party rails, bringing more transaction activity into Varo’s ecosystem.

As for the bank’s future plans for Zelle, Walsh said Varo is taking a wait-and-see approach to how it moves forward with the payments feature. 

“We don't know yet — because it's still early days — if there is a kind of cannibalization of the Zelle volume now that we have Varo to Anyone, or if it is just different transaction types,” he said.

Low-cost marketing

Walsh is betting the ability to send money to any U.S. bank account, without having to use a third-party payment app, will have broad appeal to Varo’s core demographic: Americans who live paycheck to paycheck.

The new feature comes as Varo looks to regain its footing following a difficult 2022, where it laid off 10% of its staff and made cuts to its advertising budget.

At the time, the bank’s burn rate put the firm at risk of running out of funds by the end of that year, prompting the firm to make the cuts in an effort to move closer to profitability.

In tandem with the bank’s efforts to rein in spending, Varo launched Varo Tech, a business unit aimed at reducing costs and allowing more internal collaboration across the company.

Walsh hopes Varo to Anyone, born out of Varo Tech, will work as a marketing tool for the bank, filling in the bank’s gap in advertising activity following the budget cuts.

“This is a way of getting our message out in front of millions of consumers without having to do expensive marketing,” he said. “It’s a creative product-lead way of getting out in front of consumers who may not otherwise have had exposure to the brand.”

Varo beta-tested the new P2P feature with a “few hundred thousand” accounts over several weeks before its official launch, Walsh said.

“We're seeing really nice pickup and adoption on this, both in terms of money being sent, but also recipients clicking through and applying for Varo accounts as well,” he said. “We've been very pleased with the early results.”

Varo’s efforts to cut out the middleman — in this case, P2P payments apps like Venmo and Cash App — follow a warning from Consumer Financial Protection Bureau Director Rohit Chopra regarding consumers’ use of digital wallets and money-transfer apps to store funds. 

Instead of just moving money from place to place, many consumers maintain balances on P2P apps, which in most cases are not fully insured, Chopra said during a Washington Post Live event in April. 

Chopra urged users who maintain balances on their digital wallets and money-transfer apps to move any uninsured money to a bank account.

Two years after launching a national digital banking platform, Cambridge Savings Bank said the venture is yielding better-than-expected deposit growth.

Since its debut in July 2021, Ivy Bank has surpassed $530 million in deposits and added more than 6,600 customers nationally, the Cambridge, Massachusetts-based bank said.

Cambridge said the digital-only platform’s deposit numbers exceeded the bank’s annual goal for 2022 by 64%. Ivy’s deposit growth is nearly six times greater than that of Cambridge Savings Bank’s 19 branch locations, according to the firm.

“Our goal was to really learn and understand how to be a digital-only bank,” said Katie Catlender, executive vice president and chief customer officer at Cambridge Savings Bank, on the firm’s strategy when it first launched Ivy.

The $6.7 billion-asset bank initially set fairly conservative targets for Ivy, with a goal of hitting $90 million deposits within the first year, Catlender said.

“We quickly learned, as well as acknowledged, that we had a really good thing going,” Catlender said.

Catlender attributes Ivy’s success to its fast account opening process — less than five minutes — and its ability to offer high-yield products on a digital-only platform, a feature she said has increased in demand amid the recent banking turmoil. 

“I think we were a little bit ahead of our time in knowing that the opportunity to offer higher-yielding products on a digital channel was really important, and that's proven to be the case over the last couple of years,” she said.

Ivy offers a 4.80% annual percentage yield for accounts with a minimum balance of $2,500.

The digital banking platform is powered by NCR, while fintech MANTL handles Ivy's account opening experience. The platform also uses data aggregator Plaid to enable customers to link accounts.

Beyond borders

The 189-year-old Cambridge Savings launched Ivy with the goal of expanding beyond its Boston-area footprint, Catlender said.

Using social media and digital advertising, Ivy garnered customers in 49 states, Catlender said.

“With digital, what you learn really quickly is where you're effective and where you're not, and how often you're converting someone into a customer. And that's the benefit of a digital channel,” she said.

Catlender touted the platform’s return on advertising spend, adding the bank has been able to apply what it has learned from Ivy to its brick-and-mortar marketing efforts.

As for how the bank is viewing its physical branch strategy in light of Ivy’s success, Catlender said the firm recognizes the importance of serving customers in a physical space.

“We believe physical locations and the ability to meet people in person are always going to be a philosophy of ours as a bank,” she said. “But if people want the convenience of being able to transact through their phone or their tablet or computer, we want to make that as easy as possible.”

Cambridge Savings Bank is not the only bank to target growth through the launch of a national digital brand.

KeyBank launched Laurel Road, a national digital platform for doctors in 2021, and more recently, Citizens Bank of Edmond launched a financial platform targeting military recruits.

Meanwhile, Honolulu-based Central Pacific Bank is using its relationship with Swell Financial, the digital bank it incubated during the pandemic and spun out last year, to capture mainland deposits. 

“In a digital environment, you constantly have to evolve, prevent, predict and anticipate where the market is going,” Catlender said. “That's what banking is becoming and that's the approach we're taking for both Ivy and CSB moving forward.”

Jenius Bank, a new digital-only division of Los Angeles-based Manufacturers Bank, announced the launch of its personal loan product in July, the first of several offerings the firm plans to debut in 2023.

The digital bank, which is backed by Japanese parent company Sumitomo Mitsui Banking Corp., plans to roll out a full-service suite of products that include savings and checking accounts over several months, Jenius Bank CEO John Rosenfeld said. 

Jenius Bank is launching its personal loan product in an environment plagued by high interest rates and inflation.

But despite the tough lending environment, Rosenfeld is optimistic. 

“[Other lenders] are starting to experience increased default rates on their loan book, and they will likely tighten their credit policies,” he said. “They may reduce their marketing spend. They may even lay off individuals.”

Rosenfeld said he sees an opportunity to hire newly available talent, and anticipates fewer competition in marketing channels as established lenders tighten their purse strings amid the tough environment.

“I don't have an existing loan book that I'm incurring losses on that is further impacting my overall business,” he said. “It's actually not a bad time to launch a new lending business when you're coming into a field that’s challenged.”

As a new player in the digital banking arena, Rosenfeld said the firm will lean heavily into customer service to help differentiate its products from others in the market.

“We understand that our brand is not widely known,” said Rosenfeld, who previously headed Citizens Bank’s digital bank, Citizens Access. “We understand that our experience is in its early stages of what we're trying to build long term. So we have to make sure that our products are easy to use and that we have really exceptional customer service.”

Jenius Bank will offer its customers 24/7 U.S.-based customer support online or by phone, he said.

As Jenius looks to fully launch with its savings and checking accounts this year, the firm has the support of a patient investor, Rosenfeld said. 

“[SMBC] has a very patient mindset to their investments,” Rosenfeld said.

Rosenfeld said he has conversations almost daily with executives at the Japanese banking giant, which, according to Nikkei Asia, has invested $150 million in the U.S. digital banking venture.

“They don't do short-term investments. They look at this as a long-term plan,” he said. “When we first laid out the plan to build this, they asked me for the 10-year business plan. Never in my life at any of the other banks I've worked at did anyone ever suggest they would be willing to even consider a 10-year business plan. They all want to see a three-year plan.”

SMBC’s conservative approach, and its financial support of the venture, means Jenius Bank can focus on its products, Rosenfeld said.

“Probably the biggest impact they have on us is making us think about how we approach this differently than we might have if we were a startup, having to generate investments in our business,” Rosenfeld said. “We can really focus on what we're creating for the customer.”

Phase 1

The launch of a consumer loan product is “phase 1” of Jenius’ strategy to grab a chunk of the U.S. digital banking market, Rosenfeld said.

“The way we looked at it, for us to be successful, we ultimately have to have a solid loan and deposit platform,” he said. “But the real power is when we build what we call ‘involved banking’ on top of that, which really allows a customer to glean better insights about how they save, spend and borrow their money and help them do it more efficiently.”

Jenius Bank will eventually offer consumers the ability to aggregate their money management through a single app, he said.

The company will allow users to track cash flow, as well as link data from credit cards, other banks, loans and potentially investment accounts.

Citi is rolling out a single-entry-point digital platform to cater to the needs of its commercial clients, the bank announced in July.

The platform, dubbed as CitiDirect Commercial Banking, is built to compile the lender’s global products and services into a single platform while offering the clients a better view of their banking activities across cash, loans, trade, foreign exchange, servicing and onboarding, the bank said.

The platform is live in the U.S., with more than two-thirds of Citi’s target client base — those holding between $10 million and $3 billion in revenue — using it, Mark Sugden, head of CitiDirect commercial banking and digital transformation, told American Banker.

Citi plans to launch the platform in the second half of this year across Hong Kong, India, Singapore and the U.K.

“Our new banking platform has been designed and built with a client-centric focus,” Sugden said in a statement. “The outcome is an innovative platform that responds to our clients’ complex needs and their expectations of a simple and intuitive digital banking experience.”

Shahmir Khaliq, the bank’s global head of treasury and trade solutions, called CitiDirect an example of how different teams within Citi work together to deliver various products to clients.

Single-entry platforms for commercial clients are good for banks, Jordan Sternlieb, a senior partner at West Monroe consulting firm, told American Banker. These solutions can help banks retain clients and offer more opportunities to cross-sell products and services, boosting the bank’s wallet share for every customer, he said.  

Many banks haven’t launched such platforms because of the challenges that come with it, Sternlieb said.

"There are so many lines of business involved, and everyone's got a different idea of what it needs to look like," Sternlieb told American Banker. "Who's going to pay for it? How is it all going to work? How do we execute? It's a really classic example of banks getting in their own way, based on the way they're internally organized and operating, versus what's the best thing for their customer,” he added.

Citi isn’t alone in tweaking its commercial-banking platform. Wells Fargo in December launched Vantage, an outlet that leverages artificial intelligence and machine learning to bring a “consumer-like experience” to the lender’s commercial and corporate clients.

Tasnim Ghiawadwala, global head of Citi’s commercial bank, said CitiDirect had the potential to make good on a goal the bank set forth at its 2022 investor day — namely, to double the 2% market share it claims of a $150 billion targetable commercial wallet.

“At the time, we spoke about our intention to deliver on a differentiated client experience through a single digital platform, that will empower clients and save them time, while offering them complete visibility and control,” Ghiawadwala said. “We anticipate that CitiDirect Commercial Banking will continue to evolve to support our clients as they grow their businesses globally.”

BNY Mellon and financial empowerment fintech MoCaFi have partnered to bring payment options and banking services to unbanked and underbanked Americans, communities that make up 5.9 million and 18.7 million U.S. households, respectively.

The treasury services arm of the nation’s oldest bank will now provide federal, state and local governments, and corporate clients with a digital disbursement payment service, through its Vaia platform, which will allow the entities to distribute payments to unbanked individuals, or those without bank accounts.

This means governments will be able to pay out disaster relief payments digitally, in real time, to unbanked residents. BNY Mellon’s corporate clients will be able to pay their unbanked employees in real time, too.

For example, if a government agency needs to distribute payments to residents, that agency would provide residents’ information to BNY Mellon’s Vaia platform, which would direct the agency to the solutions offered by MoCaFi. MoCaFi would then send each resident a text or email with an enrollment code informing them that an account has been created for them and instructing them to download the MoCaFi app. The resident would enter the enrollment code into the app and be presented with immediate access to their money in the form of a digital payment card — complete with a 16-digit account number, CVC code, and expiry date. An identical physical card would be sent to them in the mail, but the digital card would be available immediately.

“Once you have that pipe, [the agency] can put recurring payments in the account,” said Wole Coaxum, who founded MoCaFi in 2015 to bring the nation’s unbanked and underbanked into the folds of the financial system.

While unbanked means someone doesn’t have a checking or savings account, underbanked means they don’t have sufficient access to financial services, such as loans, beyond having an account.

For BNY Mellon’s corporate clients, Treasury Services CEO Jennifer Barker told Yahoo! News that a large grocery store, for example, might have a portion of unbanked workers — workers more likely to cash their checks at predatory check cashers, who charge a fee for each check cashed. These people would also be brought into the financial fold through the BNY Mellon-MoCaFi partnership.

Coaxum started the company as Mobility Capital Finance in 2015 to address the racial wealth gap, following the 2014 social uprising tied to the death of Ferguson, Missouri, resident Michael Brown, who was Black.

Black and Hispanic householders were significantly more likely to be unbanked than white households, the Federal Deposit Insurance Corp. found, with 11.3% and 9.3% of Black and Hispanic households respectively not having a bank account compared to 2.1% of white households.

When Brown died, Coaxum was the head of sales and segment for JPMorgan’s business banking arm.

“The death of Michael Brown reminded me of the footage I saw in the civil rights documentary ‘Eyes on the Prize,’ which really captured the uprising around 1967-68. I thought to myself, ‘It’s 2014 and the Black community is fighting the same battles as in 1967-68. I felt like I was very fortunate to have the training to address these issues, and that I wanted to get into the game,” he said.

“The social justice framework from the death of Michael Brown — it needed an economic agenda to go with the social justice agenda. I felt I could really use my time and resources to lean into the economic justice agenda,” he said. “I’d much rather in my life try to tackle a problem and fail than to look back and to have not even tried.”

Income and education also correlate to whether a household is unbanked, the FDIC report shows.

Households with an annual income of less than $15,000 are the most likely to be unbanked, at 19.8%, and the percentage of those unbanked changes drastically as household income goes up. For households making between $15,000 and $30,000 annually, 9.2% are unbanked. For households making $75,000 or more, just 0.6% are unbanked.

And while 6.8% of households with a high school diploma are unbanked, 19.2% of households with no high school diploma are — and for households with a college degree, that number goes down to 0.9%.

A potential BNY Mellon-MoCaFi partnership had been in the works since 2022. Engaging the unbanked and underbanked has long been a challenge for the government and business entities BNY Mellon serves, Carl Slabicki, the bank’s co-head of global payments, told Banking Dive via email.

“Given MoCaFi’s focus is to engage, enroll, facilitate payments and offer incremental financial services to those individuals, it was a ‘win-win’ for all collective stakeholders to pair BNY Mellon’s industry scale disbursements offering for government entities and businesses to pay and drive traffic to MoCaFi’s platform, to help further accelerate adoption and the ability for those individuals to safely receive their funds and bring them into the financial services eco-system through registration with MoCaFi,” Slabicki said.

The BNY partnership allows MoCaFi to play in a larger space and have a positive financial effect on more people — particularly, communities of color. But it isn’t the fintech’s breakthrough with one of the nation’s largest banks. MoCaFi inked a deal with Wells Fargo that allows users to access the bank’s ATMs for free. The fintech has also disbursed at least $100 million in guaranteed income, emergency rental assistance and other cash assistance programs.

MoCaFi made Forbes Fintech 50 and Fortune’s Impact 20 in 2021, and the company recently raised a $23.5 million Series B round. Coaxum said MoCaFi will use the funds to further its mission of helping underserved communities create wealth through better access to public, private and social capital. 

Black financial institutions are less likely than their minority or nonminority institution peers to offer online and mobile banking services, according to a February study by the Urban Institute.

As more consumers turn to digital options to address their banking needs, this technology disparity threatens to further shrink a category of financial institutions that have been on the decline for the last 20 years, said Michael Neal, a principal research associate at the Urban Institute.

There were 47 Black-owned banks insured by the Federal Deposit Insurance Corp. in 2002, according to FDIC data. Last year, that figure fell to 16, accounting for less than 0.03% of assets at all FDIC-insured financial institutions.

The Urban Institute study specifically focused on technology inequities at Black-owned credit unions, using the not-for-profit institutions as a proxy for Black depository institutions overall, since credit unions account for 95% of the combined number of Black credit unions and banks, according to the researchers.

Black credit unions accounted for 361 of the 381 Black federally insured depository institutions operating at the end of the third quarter of 2022, according to the report, which analyzed third-quarter call report data.

Around 80% of nonminority credit unions reported having an informational website and online banking service, compared to only half of the Black credit unions, the study found.

Neal said the report highlights a troubling trend.

Black institutions, which help expand credit to underserved areas, run the risk of losing customers if they continue to fall behind their nonminority peers in terms of digital banking offerings, he said. 

“There is a risk that these particular institutions won’t continue to thrive in this brave new world of digital banking,” said Neal, who added a drop in Black-owned banks could lead to more banking deserts and an uptick in minority borrowers turning to alternative services that may charge higher interest rates.

“There's a specific benefit that [Black banks] bring to communities of color. And they really run the risk of losing that benefit,” he said.

When it comes to investments in technology and innovation, Black-owned banks face enormous competitive pressure from their larger nonminority competitors. 

The report noted the significant size disparity when comparing Black institutions to their peers.

The average Black bank is 7% of the size of the average nonminority financial institution, according to the report.

Similarly, the study found the average Black credit union is 19% of the size of the average nonminority credit union.

When it comes to digitization, Black-owned banks face capital and capacity constraints, Neal said.

“These firms often lack people with the background to help to integrate these digital systems,” Neal added.

A lack of pressure or demand from Black consumers could also contribute to the technology gap at Black-owned banks, Neal noted. 

“Black people and other people of color are less likely than others to have a smartphone or internet access,” according to the report.

But digital banking, accelerated in part by the pandemic, is steadily becoming mainstream, Neal said.

“The financial landscape is very clearly moving in this direction,” Neal said. “And it’s a financial inclusion issue. … The research indicates that people of color are more likely to be unbanked or underbanked. And that's about people demanding services from a depository. But at the same time, it appears that these MDIs, particularly Black MDIs, are not able to offer the kinds of services that are really needed to be competitive in this environment.”

Federal and private entities have launched programs to help address the tech disparity at minority depository institutions in recent years.

In March 2021, the Treasury Department announced a $9 billion investment in community development financial institutions and MDIs to support their efforts to provide financial products for small and minority-owned businesses and consumers in low-income and underserved communities.

And in December 2021, fintech Upstart partnered with the National Bankers Association on an initiative to improve access to affordable credit for customers of MDIs through an agreement to use Upstart’s AI lending platform.

As part of the partnership, Upstart agreed to offer association members special implementation pricing, tailored volume minimums and unit pricing on small loans.

Neal said he hopes the Urban Institute report will help draw attention to the tech disparity at Black-owned institutions, as well as sharpen the resolve of those who are already addressing the issue.

“We certainly would hear about this anecdotally, but we could not find a report that actually quantified the disparities in the way that we did in our report,” he said. “My hope is that if there were any folks with skepticism in the past, they are now increasingly convinced to contribute towards solving this issue.”

A key metric regulators use to determine market competitiveness in the bank merger review process may be growing irrelevant amid the growth of digital banking and nonbanks, an Office of the Comptroller of the Currency official said in a February speech.

The Herfindahl-Hirschman Index, which regulators use to assess market concentration before and after mergers, is a “transparent, empirically proven, efficient, and easily understood measure of concentration,” Ben McDonough, the OCC’s senior deputy comptroller and chief counsel, said at the opening of the agency’s Bank Merger Symposium.

But the index, which measures a bank’s market presence based on deposit share, is becoming a less effective predictor of competition across product lines amid the growth in mobile banking and nonbank entities, and may have become less relevant since bank merger guidelines were last updated in 1995, McDonough said.

“This is so because a bank’s deposit base may have become less probative of its offering of other banking products. In addition, the size of the relevant markets for these products may have expanded exponentially with the rise of online banking products and services, while nonbank competitors have grown to an extent unimagined in 1995,” said McDonough, who delivered the event’s opening remarks on behalf of Acting Comptroller Michael Hsu, who was unable to attend.

McDonough is not the only regulator to propose a de-emphasis on the Herfindahl-Hirschman Index. Federal Reserve Gov. Michelle Bowman, in a September 2022 speech, recommended relaxing the HHI thresholds in bank merger guidelines to reflect the influx of nonbank competition.

Looser HHI restrictions may benefit struggling rural community banks that may be forced to seek a merger with an out-of-market partner because combining with another local community bank would drive up a merger’s concentration score, Bowman said.

Hsu, who took the helm of the OCC in May 2021, has long called for bank merger reform, referring to the factors and analytical frameworks regulators use to assess mergers as dated.

During a 2022 speech at the Brookings Institution, Hsu said the OCC is working with the Justice Department and fellow bank regulators to review its merger framework.

“Without enhancements, there is an increased risk of approving mergers that diminish competition, hurt communities or present systemic risks,” McDonough said.

However, a moratorium on mergers could be equally harmful, McDonough said. 

“[A] moratorium on mergers would lock in the status quo and inhibit growth and improvements that could help communities and increase competition,” he said. “We need to build a better mousetrap so that healthy mergers get approved while unhealthy mergers get rejected. Importantly, this mousetrap needs to be not only theoretically sound and consistent with our values, but also capable of implementation within the statutory criteria for merger review.”

The Biden administration has zeroed in on consolidation in banking, issuing a July 2021 executive order demanding “more robust scrutiny” of mergers.

“Though subject to federal review, federal agencies have not formally denied a bank merger application in more than 15 years,” the Biden administration said at the time.

The OCC has yet to publish a request for information on the topic, but the Federal Deposit Insurance Corp. submitted one in March 2022. 

Months earlier, two Democratic members of the FDIC board published a review of bank merger policies without the approval of the regulator’s then-chief, Jelena McWilliams, a Trump appointee.

The move sparked partisan arguments about bank mergers and acquisitions, as well as the rules binding the agenda-setting mechanism of the FDIC.

McWilliams resigned Dec. 31, 2021.

Chase Bank is banning crypto-linked transactions for its U.K. customers starting Oct. 16, the bank said.

“We’ve seen an increase in the number of crypto scams targeting U.K. consumers, so we have taken the decision to prevent the purchase of crypto assets on a Chase debit card or by transferring money to a crypto site from a Chase account,” a Chase spokesperson told Reuters.

In an email reported by CoinDesk, Chase U.K. told customers, “If we think you're making a payment related to crypto assets, we'll decline it.”

Customers can use a different bank for their crypto transactions, the email said.

Other U.K. banks imposed bans on crypto transactions earlier this year, citing fraud and volatility.

“We have taken a pretty hard line as a bank on crypto,” NatWest’s then-CEO, Alison Rose, told the House of Commons Treasury Select Committee in February, according to CoinDesk. “We're blocking retail and wealth customers from transferring into crypto assets because of the volatility and the stability of the platform.”

“We look at it through a fraud perspective,” Rose told the panel. “We know that can cause frustration for customers because they may want to invest — it's their money — but if we're evidencing significant fraud, we block them.”

As part of its reasoning, Chase warned U.K. customers that “fraudsters are increasingly using crypto assets to steal large sums of money from people.”

Action Fraud, the U.K.’s national reporting center for fraud and cyber crime, reported in May that losses to crypto fraud swelled 40% over the previous year. Such losses amounted to more than £300 million for the first time ever.

More than one-third of those losses occurred in November 2022, in the month following FTX’s bankruptcy filing, according to the Financial Times.