Fintech: The Bank Disrupters

Fintechs offer mostly free accounts with tantalizing yields and slick features, but don’t expect much hand-holding.

Photo of multiple smartphones with fintech apps
(Image credit: Courtesy Varo Bank)

With the invention of the smartphone and the ascendancy of app-based services, financial technology companies—better known as fintechs—have been disrupting traditional banking, offering attractive features to new customers who aren’t tied to traditional banks. These challenger banks (or neobanks, as they’re sometimes called) tout higher rates, quicker access to paychecks, real-time spending data and, for the most part, coverage by the Federal Deposit Insurance Corp.—all while charging low (or no) fees and being mobile-centric.

Consumers are taking notice, especially since COVID-19 made banking at a physical branch more difficult. In a December survey from consulting firm McKinsey & Co., 36% of respondents who were thinking about opening a fintech account said that these accounts were easier to use than a traditional bank account. Fintechs tend to target younger consumers, who may not have a loyal banking relationship, and other demographics that the companies believe are not well served by traditional banks.

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Rivan V. Stinson
Ex-staff writer, Kiplinger's Personal Finance

Rivan joined Kiplinger on Leap Day 2016 as a reporter for Kiplinger's Personal Finance magazine. A Michigan native, she graduated from the University of Michigan in 2014 and from there freelanced as a local copy editor and proofreader, and served as a research assistant to a local Detroit journalist. Her work has been featured in the Ann Arbor Observer and Sage Business Researcher. She is currently assistant editor, personal finance at The Washington Post.