Why Cash is a Challenge for Challenger Banks

For most Americans, digital-first banking has become part of life. According to our January 2022 ConnectedEconomy Report, 67% of U.S. consumers say they interact with their bank using digital channels, including checking their balances, paying bills and monitoring transaction alerts.

As Bank of America CEO Brian Moynihan told CNBC in February 2022, just 15% of deposits at the bank are handled by a teller at a physical branch, with the rest happening digitally. Even though in-person deposits are shrinking, traditional banks, like Bank of America, support money mobility through branch and ATM networks along with digital-first means such as mobile remote deposit capture for checks.

The same isn’t true for FinTechs that want to live up to their challenger bank reputation and support the same end-to-end money-in/money-out experience for their customers.

BINs, card rails, bank rails and routing numbers make it easy for FinTechs to accept electronic deposits. But without physical branches or access to a mobile check cashing network that can de-risk instant access to funds from check deposits, these companies cannot support the entirety of the money-in needs of their customers — both checks and cash.

Financial institutions need to support both types of paper-based payment methods. Cash use may be waning in the U.S., but it still represents about a fifth of all transactions in the country, according to the Federal Reserve Bank of San Francisco.

Checks are more tenacious, accounting for 50% of the country’s $25 trillion payment volume and still used for payroll, disbursements, benefits, tax payments and payments for services.

For FinTechs to be Money Mobility–ready, they need to support money in from the sources that aren’t “hard-wired” to electronic payments network and use APIs to simplify digital funds in.

FinTechs should support the money-in capabilities for the paper-based deposits that still represent a promising source of money in for consumers without putting themselves at greater risk for fraud.  A money mobility network can help these businesses align their need to take care of that risk with the need to accept money using all available methods.

For more on the challenges facing when it comes to money mobility, download The Money Mobility Playbook, a PYMNTS and Ingo Money collaboration.