Explosion of offerings by U.S. fintechs

Efma feature

08 July 2020

As consumer-facing fintechs mature in America, they are adding new services to fuel their growth aspirations.

The fintech scene in the United States continues to give customers a wealth of options. In the last decade, fintechs have exploded onto the scene in America, serving various niches for customers. From digitally-focused challenger banks to a slew of investing apps, tech-savvy customers have a plethora of options when it comes to money management. Now, the most successful fintechs are displaying serious ambitions beyond their original offerings.

Last week, the biggest challenger bank in the country, Chime, announced a new product offering – the Credit Builder card. Customers can now use a credit card, which is linked directly to a user’s current account and doesn’t allow for overspending, to establish their credit score. According to Chime, younger customers are increasingly opting for debit cards, believing them to be a safer choice and void of the associated risks of credit cards. Using credit cards, however, has long been a proven way of building up the credit score necessary for big purchases later on in life. The Credit Builder card is Chime’s way of providing the type of security customers seek in a debit card while also giving younger customers a way to confidently increase their credit score.

Robinhood, the pioneering, commission-free investing app that has brought stock trading to the masses, rolled out debit cards at the end of 2019. Their new Cash Management links customers’ brokerage accounts to a current account that can be accessed immediately via debit card. Robinhood’s Cash Management product is no mere current account. Robinhood users that opt into the program will see their uninvested cash earn yearly interest.

Wealthfront, a fintech that made its mark through passive investing products, followed Robinhood’s lead in recently rolling out a very similar product. Wealthfront Cash provides customers with a checking account, a debit card, and direct deposits. Their current account also earns interest. Acorns, who automatically rounds up purchases and invests them in ETFs, has done a similar thing, offering customers an all-in-one investment, retirement, and checking account.

All of these developments share a common theme: the aspiration to become a one-stop shop for the financial needs of American consumers. The current financial landscape in America is discordant. An American very likely has a checking account with their personal bank or credit union, a credit card with a different company such as American Express, a retirement fund with one of the fund giants like Vanguard or Fidelity, and then a personal investing account with still another financial institution such as E*trade.

What these fintechs are seeking to do is provide the entire range of financial products and tools that a consumer might need. Why have your money in five different places when one company can meet all of your financial needs? While they started as companies offering a cheaper, more digital service for a certain type of customer, as they have grown they have recognized the potential in being able to offer a whole suite of tools to the wider public. A key element of their success has been bringing tools traditionally reserved for the wealthy to everyday consumers. These companies are riding the wave of financial democratization toward record valuations.

Crucially, though, these fintechs are prime examples of the importance of partnerships in the financial services sector. While they are competing for consumer dollars, they wouldn’t exist without partnerships they have forged with established banks. Most of the biggest fintechs in America, while offering what many consider traditional banking services, do not have their own banking licenses, but instead rely on partnerships with banks that have FDIC charters. These banks are the actual end-holders of customers' money. The fintechs provide slick interfaces that make managing and growing money an easy, modern experience. The established banks provide the less flashy stuff – the needed plumbing and back-end processes that meet strict regulatory requirements. Without partnerships, these companies would never have been able to get off the ground.

The finance sector in America has experienced significant disruption in recent years and the top players have grown at incredible rates. But, as with any high-performing company, there is pressure to grow the business and find new revenue streams. The increase of product offerings is a result of those twin pressures. While not every fintech will emerge a winner, one group of people certainly stands to benefit: the American consumer. They can expect to continually see impressive new ways to manage and invest their money.  

Keywords : GAFA/New competitors , Bank Products & Services , Digital/Mobile channels

Geography : USA