COVID-19 has accelerated a deepening consumer relationship with fintech that has driven Americans further into the ever-growing digital money ecosystem.

At the forefront, wealth management solutions, such as digital banking and investing apps, have emerged as personalized tools that allow consumers to save and grow a nest egg amid the pandemic.

More important, these innovative digital offerings have opened greater avenues of investor access to younger generations, underbanked individuals and underserved minority communities that could redefine American personal wealth management in the years to come.

The Incumbent Evolution

At the onset of the pandemic, mobile banking saw a 200% surge in registrations as Americans quickly turned to digital tools to navigate the closure of physical branches. Incumbent financial service companies like Charles Schwab and Wells Fargo found success in getting enrollments for their extended portfolio of products. Yet, the pandemic has shifted the American consumer view toward a desire for digital solutions that incorporate cutting-edge technologies as table stakes.

The rise of machine learning-based digital advisors — such as Bank of America’s artificial intelligence (AI)-enabled digital assistant, Erica — has allowed incumbent firms to draw on their history with their customers to generate personalized wealth management goals and identify optimal strategies to meet them.

Digital Banks Rise to Challenge

Still, with 6.5% of Americans remaining unbanked and another 16% underbanked according to the Federal Reserve, neobanks, or entirely digital banks, have emerged to supplement and even fill the American traditional banking divide.

Since the beginning of the coronavirus pandemic, American neobanks including Chime and Current have seen a record amount of new user registrations. Like many other newer fintech firms, these companies have capitalized on offering accounts that waive minimum balance requirements or overdraft fees, which can prevent low-wage earners from banking with traditional institutions.

Digital banks have also adapted their services to help Americans leverage their savings into greater personal wealth. British neobank Revolut announced a 4.5% bonus savings rate in addition to its base annual interest rates in an effort to shore up its services as the primary spending option for U.S. consumers.

Chime notably opened early withdrawals for incoming stimulus checks to its customers at the beginning of the pandemic. Even Credit Karma, a fintech giant that emerged from the ashes of the 2008 recession, has pivoted to neobanking by offering savings accounts as well as a new checking account offering.

Swipe Right for Your Ideal Stock Match

Despite the ease of fintech savings tools, the growth prospects for just holding money in these accounts does remain modest when most banks have cut their interest rates to below 1%. Per a recent survey by Plaid, a fintech subsidiary of Consumer Technology Association (CTA)® member Visa, 30% of respondents stated that they were relying on fintech for more complex financial management, such as investing.

Digital investing tools using tap-swipe-buy smartphone interactions, such as Robinhood and Acorns, have emerged as popular options for U.S. consumers. In the early stages of the pandemic, both companies saw a surge in app usage and user signups, with Robinhood processing 10 times its 2019 average monthly deposits in March alone and Acorns posting a single day sign-up record of 9,800 users the same month.

The coronavirus has also increased interest in investing apps that use algorithms to auto-adjust portfolios and focus on goal-based planning according to a recent Vanguard survey. A “robo-advisor” offers wealth management guidance so that customers do not have to visit a human financial planner. Betterment, a popular robo-advisor upstart, and Ellevest, a similar women-led fintech aiming to reduce the gender wage gap, have seen a surge in registrations and expansions of their business models to accommodate new users.

However, the most revealing factor about the rise of these zero-fee stock trading and micro-investing apps lies in the demographics of their users: 60% to 80% of their user bases are millennials. This level of entrenchment with a younger generation, which has overtaken baby boomers as the most populous and is set to be the dominant American spender in the coming years according to Morgan Stanley, has well positioned investing-focused apps at the forefront of the future of wealth management.

A Fintech-Enabled Equitable Economic Future

Ultimately, the accessibility of these newer fintech options offers a more democratized way for Americans to improve their economic status amid a pandemic that has only accelerated income equality in the U.S.

For example, Greenwood, a majority Black and Latinx-owned digital bank, which opens January 2021, had tens of thousands of applicants on its waiting list within 24 hours of its website launch. The bank looks to serve minorities, who are unbanked at significantly higher rates than white Americans according to the FDIC.

Simply put, the migration of wealth management to a digital ecosystem offers a plethora of opportunities for more Americans to grow their personal wealth.

This article is the second in CTA Research’s Industry Intelligence series on Digital Money, examining the current state of fintech and diving deeper into the innovations and trends of this sector.