Digital banking encompasses many different banking tools and trends, but one thing is certain between them all: digital banking has been steadily on the rise. Most Americans have used digital banking services in the past year, and more banks are offering new, innovative digital tools, from mobile apps to automated savings features.

The rise of digital banking has coincided with a decline in the presence of traditional banks, which have faced a loss of 9 percent of all branches across the country in the past four years. While traditional banks offer access to branches, digital banks — those only with online and mobile banking services — often provide attractive yields and low (if any) bank fees.

Here’s everything you need to know about digital banking trends in 2022 and how they compare to traditional banking statistics.

Key statistics on digital banking

  • Nearly two-thirds (65.3 percent) of the U.S. population uses digital banking services.
  • While almost 80 percent of millennials reported using digital banking in 2022, only 48.5 percent of baby boomers reported the same.
  • The number of people using digital banking has increased by 4 percent since 2018.
  • Branches aren’t obsolete yet — of those who prefer online or mobile banking, 79.9 percent still visited a branch in 2019.
  • About 27 percent of Americans use an online-only bank.
  • Of those at online-only banks, 88 percent reported they are satisfied with the bank’s services.
  • Meanwhile, only 66 percent of consumers report being satisfied with traditional banks.
  • Americans have 5.3 bank accounts across financial institutions on average.
  • Around 5 percent of Americans are unbanked, meaning they have no bank accounts.

Sources: Statista, FDIC, JD Power, Galileo, PaymentsJournal, U.S. Federal Reserve

Traditional banking vs. digital banking

Traditional banks are those that have a physical presence, and many of the largest U.S. banks, including JPMorgan Chase and Bank of America, are considered traditional banks. Online banks do not have branches, and they may offer services both via desktop website and mobile apps.

The fintech Galileo found that 65 percent of consumers use traditional banks for their primary bank accounts, while JD Power reports that 27 percent primarily use online banks. However, of the 65 percent using traditional banks primarily, 77 percent said that they keep some of their funds elsewhere.

Here are the differences between traditional and online banks and what advantages they each have.

Traditional banking Digital banking
Services Primarily branch banking, though some may also offer online accounts Primarily online and mobile banking
Common savings account interest rates 0.01 – 0.02% APY 1 – 2.15% APY
Share of consumers’ primary accounts 65%* 27%
Advantage(s)
  • Wider selection of products
  • In-person customer service
  • Large ATM networks
  • Higher interest rates
  • Banking can be done anywhere
  • Lower fees
Disadvantage(s)
  • Higher fees
  • Lower interest rates
  • May require more documentation to open an account
  • Harder to make cash deposits
  • May have limited services and products

* The remaining share of consumers who have their primary account at neither a traditional nor digital bank may primarily bank with a credit union or be unbanked.

Traditional banking trends

Traditional banks — those that have a physical presence — are still the predominant financial institution where people keep their primary bank accounts. However, their reach is declining.

Between 2017 and 2021, 9 percent of all branch locations closed down, a loss of around 7,500 branches, according to the nonprofit National Community Reinvestment Coalition (NCRC). Many of these closures were propelled by the COVID-19 pandemic, during which the rate of branch closures doubled.

The advantages of online banking (lower fees, ease of access) have recently affected the way that many traditional banks do their business. One significant change in traditional banking over the past few years has been the elimination or reduction of overdraft fees. Citibank, PNC Bank and U.S. Bank are several of the banks that have eliminated or decreased their overdraft fees.

Most large, traditional banks also now offer comprehensive mobile apps, where consumers can complete basic banking transactions such as transferring funds between accounts, checking account balances and making mobile check deposits. Some of these apps even come with advanced tools like automatic savings features.

Several traditional banks also offer account opening bonuses to incentivize consumers to open an account with them.

Key statistics

  • In 2021, there were 72,534 FDIC-insured bank branches across the U.S.
  • The bank with the most branches is Chase Bank, which has 4,850 branches in the U.S. and 198 foreign branches.
  • While 65 percent of consumers use a traditional bank for their primary bank account, 61 percent say they are somewhat or highly likely to switch to an online-only bank.
  • Between 2017 and 2019, the number of consumers who visited a branch 10 or more times per year declined from 35.4 percent to 28.4 percent.
  • The number of those who spoke with a bank teller in person to complete banking transactions declined from 86 percent in 2017 to 83 percent in 2019.
  • Before March 2020, the rate of branch closures was 99 closures each month on average. This more than doubled with the onset of the COVID-19 pandemic to 201 closures per month.
  • About one-third of the branch closures that occurred between 2017 and 2021 were in low- to moderate-income neighborhoods or neighborhoods made up of predominantly racial minority residents.

Sources: Statista, Galileo, FDIC, NCRC

Digital banking trends

Digital or online banks are those with primarily web or mobile services. While they don’t have branches, they may be part of large ATM networks, where consumers can still access cash. Online banks, such as Ally Bank and Discover Bank, have been a quickly growing market, with the digital banking market estimated to be $4.3 billion in 2021.

Without the cost of establishing and operating physical branches, online banks can redirect those funds elsewhere, such as yields offered on savings products or ATM fee reimbursements. Most of the top savings account rates are offered by online banks.

Digital banking is becoming more popular with consumers. An estimated 203 million people use digital banking services in 2022, and that number is projected to reach 216.8 million by 2025.

Another trend in digital banking is the emergence of neobanks, sometimes referred to as challenger banks. Neobanks are fintech companies that offer a variety of unique banking services, from regular checking accounts to advanced budgeting tools. Most neobanks are not chartered, but they may partner with FDIC-insured banks to ensure that deposits stored are federally protected. Some popular neobanks include Chime, Varo and Current.

Key statistics

  • The number of consumers in the U.S. who use digital banking increased from 196.8 million in 2021 to 203 million in 2022.
  • The majority of consumers (61 percent) use digital banking services at least once a week.
  • Around 20 to 25 percent of consumers say they would prefer to open a bank account online but are unable to do so at their current bank.
  • 57 percent of millennials and 64 percent of Gen Z have a financial account with a nontraditional institution, such as a neobank or other fintech.
  • The age group most likely to use a digital-only bank is 35- to 44-year-olds, with 29 percent of those in this age range having digital-only accounts as their primary accounts.

Sources: Statista, PwC and Galileo

Online banking

Online banking makes it easy for customers to open and check up on their bank accounts from any location where they have internet access. In addition to digital-only banks, many traditional banks offer online accounts too, such as the 360 Checking account from Capital One.

The COVID-19 pandemic had a significant effect on online bank usage. FICO, a data analytics company, reported that 71 percent of U.S. consumers were willing to open an account online, and 52 percent were more likely to open an account online than before the pandemic.

According to Galileo, 96 percent of consumers report security of accounts and funds as a top priority when opening a bank account. Online banks are just as safe as traditional banks, as long as they’re insured by the FDIC, which covers up to $250,000 per depositor, per account type. Bank websites are encrypted to prevent cybercrimes, and they typically require multi-factor authentication to ensure that no one hacks into your accounts.

Some online banks focus on a particular cause or consumer group. Limelight Bank, for example, invests the deposits from its certificates of deposit (CDs) into solar panel initiatives. Valley Bank, a regional bank with online services, has accounts specifically designed for those working in the cannabis industry, including cultivators and wholesalers of cannabis.

Here are some of Bankrate’s picks for the best online banks:

Bank name Best for Why we like it
Ally Bank All savers
  • High APYs
  • Highly rated app
  • No monthly fees
TIAA Bank Interest-bearing checking account
  • Guaranteed high yield on checking and money market accounts
  • Expanded federal deposit insurance
  • Highly rated app
BrioDirect Bank High-yield CDs
  • Low minimum deposit requirements
  • High APYs
  • No monthly fees
Discover Bank Cash back rewards
  • Earns 1 percent cash back on debit card purchases
  • No fees
  • No minimum deposit requirements
Quontic ATM accessibility
  • Low minimum deposit requirements
  • No monthly or overdraft fees
  • Over 90,000 fee-free ATMs across the U.S.

Online banking by generation

Though many might be quick to assume that the younger generations are more likely to use online banking, the highest usage of digital-only banks is with 35- to 44-year-olds. Of this age group, 29 percent have their primary account at a digital-only bank, while 26 percent of 25- to 34-year-olds do and 24 percent of 18- to 24-year-olds do, according to Galileo.

Age range % with online-only bank account as primary account
18-24 24%
25-34 26%
35-44 29%
45-54 18%
55-64 8%

Source: Galileo

Mobile banking

Many digital banks offer mobile apps where customers can complete basic banking activities, such as checking their balances and transferring funds between their own accounts or to peers.

Mobile banking as a primary method of accessing bank accounts has increased greatly in recent years. In 2015, it was the primary method of banking for 9.5 percent of Americans; this increased to 34 percent in 2019, becoming the most prevalent primary method, according to the FDIC.

The benefits of mobile banking include:

  • Convenient access: You can access the bank’s mobile app anywhere there’s an internet connection.
  • Mobile wallets: Bank accounts can be connected to a digital wallet, such as Apple Pay, to make contactless payments in stores or online.
  • Fraud alerts: Mobile bank apps frequently come with a variety of alerts that users may set up to notify them of any suspicious activity or large transactions.
  • Send money between peers: You can connect your bank account to a peer-to-peer (P2P) payment app to send money to friends and family with a few taps. Many banks even have Zelle, a popular P2P app, built into their mobile banking app.
  • Pay bills: Some mobile banking apps allow you to set up mobile bill payments. You just need to add the biller’s information to make a payment to them.
  • Deposit checks easily: You can deposit checks through a mobile app by taking pictures of the front and back of the check. The images are processed by the bank to make sure the check is valid.

Here are some of Bankrate’s picks for the best mobile banking apps:

Financial institution Best for Why we like the app
Chase Bank Automated savings features
  • Autosave feature that calculates how much the user can save each month and transfers it for you
  • Built-in budgeting features
  • Lets you add external accounts
Bank of America Virtual assistance
  • Comes with Erica, a virtual assistant
  • Schedule appointments at a branch through the app
  • Option to round up debit card purchases and deposit the extra cash into savings
Huntington Bank Predictive money tools
  • Comprehensive account alerts
  • Built-in budgeting calendar, which predicts upcoming transactions based on income and payment history
Capital One Account alerts
  • Comes with Eno, a virtual assistant
  • Real-time transaction notifications
Chime Cutting-edge technology
  • Comes with a tool that can automatically deposit 10 percent of paychecks into savings
  • Early payday feature
  • Lets you connect external accounts

Key statistics

  • The share of Americans who primarily use mobile banking apps to access their accounts increased by 24.5 percentage points from 2015 to 2019.
  • Mobile banking was the primary method for account access for 34.5 percent of Americans in 2019, compared with 21 percent for those who use bank tellers as the primary method.
  • About 63 percent of households whose reference person was between 15 and 24 years old used mobile banking as their primary method of account access in 2019.
  • In 2018, 62 percent of consumers reported having a greater awareness of their financial situation thanks to mobile banking.
  • About 41 percent of consumers using mobile banking also reported having fewer concerns about their finances.
  • About 56 percent of consumers used their smartphone to make a mobile payment in 2019.

Sources: FDIC, Statista and Pew Charitable Trusts

Mobile banking by generation

Mobile banking is more popular among younger generations, with almost 63 percent of 15- to 24-year-olds reporting mobile banking as their primary way of banking in a 2019 study by the FDIC. Meanwhile, only 8.3 percent of those 65 years or older reported using mobile banking primarily.

Here is how mobile banking as the primary method of banking differs across all ages:

Age group % who primarily use mobile banking
15-24 62.9%
25-34 61.7%
35-44 49.8%
45-54 36.3%
55-64 21.3%
65+ 8.3%

Source: FDIC

Mobile banking by race/ethnicity

According to the FDIC “How America Banks” report, households made up of two or more races are most likely to use mobile banking as their primary method of accessing bank accounts. Nearly half, or 45.5 percent of multiracial households, reported mobile banking as their primary method, while 37.2 percent of Black households and 31.4 percent of white households reported the same.

Race/ethnicity % who primarily use mobile banking
Two or more races 45.5%
Hispanic 41.3%
Asian 39.3%
Black 37.2%
White 31.4%
Native American or Alaska Native 30.5%

Source: FDIC

History of digital banking

While we might think of digital banking today as the advanced technology of mobile apps and online bill payment services, these technologies wouldn’t exist without the invention of tools for even simpler processes.

One of the first technological advances for banking was the development of the Electronic Recording Method of Accounting (ERMA) system. This digital checking system was first used by Bank of America in 1959 to electronically process checks.

Later, banks started to integrate the internet into their platforms for customers to be able to access their bank accounts online. Wells Fargo was one of the first to do so, launching its internet banking system in 1995.

The 2000s came with the development of new fintechs, such as PayPal, which allowed users to make P2P payments, and Google Wallet, which allowed consumers to make payments from their digital devices.

In more recent years, technology has advanced in terms of both security and breadth. A crucial year for financial technology security was 2015, as this was when Bank of America introduced fingerprint identification technology into its mobile banking system.

How to open a digital bank account

Opening a bank account online is not too different from opening an account at a branch. The required documentation is generally the same, and it doesn’t take long to do.

First, make sure to find an account that fits your needs. One way that digital bank accounts differ from traditional accounts is that they may offer much higher yields and lower fees. The market for savings accounts, for example, is much more competitive with digital banks, with some having yields of up to 2.35 percent.

Since the account is digital, you won’t need to worry about looking for local branches. However, you may want to consider access to ATM networks, so that you can easily take out cash.

When submitting an application for an account, make sure to have the following information prepared:

  • Social Security number
  • Driver’s license or government-issued ID
  • A bill with your name and address on it
  • Other bank account and routing numbers to fund the new account

Once your application is approved, you’ll need to fund the new account. A common way to do this is by linking an external account and transferring funds into the new account. You may also be able to fund the account by making a mobile check deposit or by sending money through a P2P app, such as Zelle or PayPal.

Frequently asked questions