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Insight of the Day: 44% of Millennials Used Non-Bank FIs in 2023, Leading All Generations

Key Findings:

  • Non-Bank FI Usage on the Rise: The use of non-bank financial institutions (FIs) is increasing in the U.S., with millennials leading the trend. As of January 2024, 36% of U.S. consumers used non-bank FIs, up from 33% a year earlier.

  • Millennials Lead the Way: 44% of millennials used non-bank FIs, followed by 43% of bridge millennials. Baby boomers and seniors were the least likely to use non-bank FIs, with only 28% reporting usage.

  • Income Influence: High-income earners were more likely to use non-bank FIs, with 37% of those earning over $100,000 annually exploring these alternatives, compared to 31% of those earning less than $50,000 annually.

  • Non-Banks as Primary FIs: While 21% of millennials used non-bank FIs as their primary financial institution, only 6% of baby boomers and seniors did the same.

  • Possible Trend Reversal: The percentage of low and middle-income consumers using non-banks as their primary FIs slightly decreased in 2023, possibly due to economic uncertainty or the aftermath of recent bank failures.

Key Implications:

  • Changing Consumer Preferences: The growing use of non-bank FIs suggests that consumers are increasingly seeking alternatives to traditional banking options. This could be due to factors like convenience, accessibility, or a desire for more innovative financial products and services.

  • Millennial Influence: Millennials, as the largest generation, are driving this shift towards non-bank FIs. Their preferences and behaviors are likely to shape the future of the financial services industry.

  • Importance of Trust and Security: The slight decrease in the use of non-bank FIs as primary institutions among some income groups suggests that trust and security remain critical factors in consumer decision-making.

  • Opportunities for Non-Bank FIs: The growing demand for non-bank financial services presents significant opportunities for these providers to attract and retain customers, particularly among younger generations and high-income earners.

Overall, this data highlights the evolving landscape of financial services and the increasing role of non-bank FIs in meeting consumer needs. It underscores the importance for traditional banks to adapt and innovate to remain competitive in this changing environment.

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