The Threats to Checking Accounts

person using laptop computer

Over the first half of the 2010s, the number of checks written in the United States declined from 41.9 billion to 17.1 billion — a nearly 60% drop. Bad news for checking accounts, right? Wrong. 

According to the FDIC, the percentage of U.S. households without a checking account dropped from 8.2% in 2011 to 7% in 2017, and since 2000, deposits at banks have tripled. 

So, all’s well with checking accounts, right? Not quite. There is a longer-term trend hampering FIs’ efforts to keep up the pace of growth. We have a name for this trend: deposit displacement. 

The checking account is in trouble—not because people write fewer checks—but because of the availability of easy money movement, the absence of any benefit to keeping money in the checking account, and the inability of FIs to find a value proposition beyond budgeting and expense categorization capabilities that don’t appeal to a broad enough set of consumers. 

Checking accounts are becoming just a way station for consumers’ money. Direct deposit puts their money into checking accounts, but once there, there’s little reason for consumers to keep it there, as they easily transfer it to their P2P, HSA, and investment accounts. 

For example, many bankers have dismissed the threat of P2P payment providers like Venmo because of the providers’ lack of revenue generation. What those bankers have missed is the brand affinity these firms have built with consumers. 

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Want to know how to bring that revenue back? Download and read Reinventing Checking Accounts today.