Banking, Investing in a Digital World



Back in the day, going to the bank was a very big deal.

Walking through the heavy double doors onto the marbled floor, filling out the deposit or withdrawal slips, and sliding that piece of paper through the tight teller’s window is a scene depicted in hundreds of movies over time. The scene appeals to those people who performed that very act whenever they needed to access their cash.

Those days are almost entirely gone. Banks are no longer seen as hallowed ground, and they are no longer a weekly stop on the way to the grocery store or a family outing. The physical brick-and-mortar bank has been replaced in some cases by a kiosk set up inside the grocery store, or a drive-up only service attached to a storefront in a strip mall.

To some investors, the physical manifestation of a bank is not even a consideration any more.

Consumers today can access their funds in a bank account by use of a debit card, and they can conduct deposits by sending a photo of a check to their account electronically, if they for some reason are not receiving a direct deposit. The digital world has all but replaced the concept of a physical bank.

Most investors still have bank accounts, and may have actually had to step into a brick-and-mortar establishment to create the account. But many investors today have bank accounts with firms that have no physical bank to offer. They are online only banks, and they are growing in popularity.

According to Spectrem’s new study Wealthy Investors and the Use of Digital Tools, 27 percent of all investors use an online-only bank (Ally Bank being perhaps the most prominent example). And that type of institution is not just being used by young investors: approximately one-quarter of Baby Boomers and World War II investors employ an online-only bank.

Asked to equate their interest in online-only banking on a 0-to-100 scale, investors rated their interest at 33.99, which is not a nod in favor of online-only banking but also not a complete disregard for the concept either. Among Millennial and Generation X investors, interest climbed to near the midpoint (50.28 for Millennials, 45.91 for Gen Xers).

Banks, historically, are a place that holds money and offers low-rate interest-bearing products like certificates of deposit. But banks also offer high-end investment opportunities and provide portfolio advisor services as well.

However, investors using online-only banking services are not yet looking at those banks for investment options. Asked to place on a 0-to-100 scale their interest in investment services from an online-only bank, investors placed their interest at 26.97 overall, although once again Millennials led the study with an interest level of 49.58, which is just below the midpoint and not a ringing endorsement of the concept.

Back in the day, a banker was one of the most respected members of the citizenry, and meeting with a banker was an official business event. But investors who place their funds in an online-only bank do not have the opportunity to meet and discuss banking options with a member of their community who happens to work at the bank.

Which brings us to the idea of working with a financial advisor without actually meeting that person. Some investors do that, including almost 30 percent of Millennials who have a financial advisor they have never met. Thirteen percent of investors have a financial advisor they have never actually been in the same room with.

Such faceless relationships may be the wave of the future, as digital communication and business applications make in-person meetings unnecessary.   



©2019 Spectrem Group