Banks say they’re gaining on fintechs during pandemic
Fintech startups chipped away at U.S. banks’ customer base for years, in everything from wealth management to consumer lending and beyond. Now banks says they’re taking some market share back.
Traditional lenders are seeing the coronavirus pandemic as weakening the upstarts that have been challenging them since the last financial crisis, with consumers seeking refuge with larger companies to cope with the outbreak’s economic toll. Clients are gravitating toward the “biggest, stable institutions,” Morgan Stanley Chief Executive James Gorman said.
“There were some major outages with some of the new online robo players,” Gorman said Tuesday at Morgan Stanley’s Virtual U.S. Financials Conference. “That doesn’t work. You can’t not access your account for several days.”
Earlier this year the trading platform at the online brokerage Robinhood Markets failed repeatedly as global stocks swung on news about the coronavirus. The glitches spurred some clients to leave the platform for competitors.
Bank of America customers have opened almost 300,000 new investment accounts on the company’s Merrill Edge platform, consumer and small-business head Dean Athanasia said during the conference.
There’s a “flight to quality,” he said. “So we are attracting an awful lot of new clients.”
The client influx goes beyond investing and wealth management. Citizens Financial Group is gaining market share in mortgages as “a lot of the nonbanks are having some real challenges at the moment,” consumer banking head Brendan Coughlin said Tuesday.
For fintechs, the pandemic marks the first major economic slump they’ve dealt with, testing their businesses as customers retreat to the safety of traditional banks. Money has been pouring into the largest banks since the coronavirus outbreak began hurting the economy. Deposits at the 25 largest domestically chartered commercial banks rose by about $1.3 trillion from the end of February through May 27, according to Federal Reserve data.