- The scale of their networks and their unique charters have long provided moats for banks, but these moats are evaporating thanks to digitization and greater regulatory openness to granting charters to disruptors.
- The intensified competition comes at a time when growth is constricted by low population growth and when profitability is squeezed by skyrocketing customer acquisition costs and margin compression.
- To defend their franchise, banks need to engage decision intelligence to augment the human touch in delivering the right products and services to the right customers, at the right time.
These days it seems as if everybody’s either a bank or wants to become one. New charter applications in various public stages of the application and approval process range from household names like Ford, GM, Edward Jones and PayPal to the buy now, pay later behemoth Affirm to disruptors like Mercury and NuBank, and the crypto native bank Erabor.
Still others, like Chime and CashApp, have acquired tens of millions of customers through digital wallets by leveraging banking as a service (BaaS) providers to hold insured deposits. Whether or not these companies or others apply for charters remains to be seen. What matters now is that millions of customers consider any one of these fintechs to be one of their “banks.”
Differences among the new market entrants abound, but they tend to share at least a few of these attributes, which makes them potentially formidable competitors:
- Large networks of loyal customers
- Experience building products customers love
- A strong digital mindset
- Unconstrained by legacy systems or balance sheet architecture
Often, these new entrants are identifying, reaching and winning customers at the earliest stages of the financial journey, long before a traditional bank enters the consideration set.
Compounding the challenge for traditional providers, the population of total customers is stubbornly flat, with growth around 1%, and participation in GDP expansion uneven. Put simply, there’s just not enough demand for banking services to feed the supply flooding the market.
How We Got Here and Where We’re Headed
Banks have long enjoyed moats associated with both the physical scale of their networks and the unique privileges associated with their charters, chief among them being the license to hold insured deposits. But those moats are evaporating quickly because of these systemic changes:
- Digitalization 1.0. Ubiquitous smartphone access and shifting customer preferences to transact digitally, both accelerated during Covid, have eroded physical networks. And while branch networks are far from obsolete—the largest banks are actually investing in their networks—to sizable bands of the population, it’s now possible to be a credible bank without a network.
- Bridging the regulatory moat. Three factors have conspired to significantly reduce the efficacy of the regulatory moat on deposit taking. First, a class of banks developed a novel BaaS business model built on renting their access to regulated banking activities. This in turn allowed fintechs to offer customers “wallets” that, for all meaningful intents and purposes, felt like deposit accounts, which their customers willingly embraced. Second, insured deposit networks scaled, which allowed BaaS banks to support their fintech clients in scaling without ballooning their own balance sheets. Third, over the last year in particular, bank regulators have developed a newfound openness to granting charters, allowing more nontraditional players to bypass the BaaS model and become banks.
- Digitalization 2.0. We’re in the early stages of this final step, but it could be the most disruptive yet. A big part of what has made deposits sticky and valuable to banks has been the degree to which they are interconnected with payments friction. Tokenization now has the potential to reduce friction and disintermediate the physics of a payment and a deposit. As this technology matures, the link between a customer’s daily financial activity and their primary banking relationship will weaken further. And this will further accelerate as agentic applications develop to drive programmable money. It’s still early and the future is unknown, but in Curinos’ view, it’s more likely than not that much more change is on the horizon.
What are the Implications for Banks?
Against this backdrop, banks face two key challenges: the Growth Conundrum and the Profitability Conundrum.
The Growth Conundrum holds that while competitors are rushing into the market, it’s hard for banks to generate incremental demand for their core services of holding deposits and making payments. That’s because these activities essentially scale with population and GDP. Said another way, consumers don’t allocate more cash to deposits just because they’re presented with more options on the market. (And as a technical point, most individually observed shifts between risk assets and deposits are deposit-neutral at the system level because for each risk-asset buyer there’s a seller depositing the proceeds).
The impact to payments volumes is similarly marginal. Before Venmo made it easy, people still split the bill at dinner. They just replaced cash or card transactions with transfers on a peer-to-peer network.
Moving from theoretical to the observable, most regional banks are struggling to grow both customers and retail deposits at the rate they would like. In fact, fewer than half of banks we’ve studied have managed positive growth on both of those key dimensions. Only 10% of banks have achieved three percent customer and deposit growth, targets typically aligned with bank financial plans (Figure 1).
Figure 1: Net Checking Customer Growth vs Net Total Retail Deposit Growth | Jan 2025 – Dec 2025
Sources: Curinos Deposit Analyzer | Net checking-tied customer count growth, all retail consumers total relationship balances, institutions with significant M&A activity removed as outliers | Curinos Analysis
Figure 2: Cost per Acquisition (CPA) – Checking | 2018-20251
Source: Curinos Marketing Analyzer | Curinos Analysis | 1 CPA includes all channels, incentives and offers (including walk-ins).
Figure 3: Falling Rate vs. Rising Rate Cycle Beta by Line of Business
Note: Falling rate beta based on Aug 2024 – Jan 2026; rising rate beta based on Feb 2022 – Jul 2024
What Can Banks Do About It?
In today’s market, one thing’s clear: banks can’t be complacent. To defend their franchises and ultimately retake ground, banks need a new source of defensibility—a decision intelligence operating model that delivers the right products and services, to the right customers, at the right time. This may sound straightforward, but doing it at scale is exceptionally complex. Leveraging decision intelligence to augment the human touch that bankers can provide is the key to differentiation. Let’s pick apart these three components a bit.
Right products and services. Many new competitors are fundamentally product companies and technology companies more than they are financial services companies. Operating with a different mindset, technology infrastructure and financial model, these businesses are delivering step-change improvements to customer experience. For example, blockchain lender Figure funds home equity loans 4x faster than most banks. Similar levels of disruption are evident in fintech small business products that natively integrate a 360-degree view of lending, deposits and payment activity on a single pane of glass. Even if technical or financial reality at banks makes product evolution incremental, bankers should at least be thinking about what radical improvement would look like—because somebody out there already is.
Right offer, right customer, right time. Having the right products is only half the battle. They also need to get into the hands of the right customer at the right moment. Advances in decision intelligence are radically changing the tools available to businesses to find and know their customers. The market has reached an inflection point whereby the availability of data and the capabilities of AI engines to process that data are reshaping prospect targeting and relationship deepening. These capabilities are native to the business models of new market entrants, and banks need to keep pace to avoid having their most valuable prospects and customers picked off.
Bringing it home with the human touch. In banking, the last mile really matters. It’s where the right product, services and offers are delivered to the right customer at the right time. And those points of contact tend to coincide with major milestones for individuals and businesses. As part of personalized relationship management, bankers are good at recognizing these milestones and responding. But without the support of decision intelligence, they’re inefficient, inconsistent, and they can’t scale. Banks that can supercharge their human capital with decision intelligence, on the other hand, stand the chance of achieving a radical redefinition of their value proposition by making banking feel like a valued experience rather than a utility. In a market where software is commoditizing the transactional elements, the human touch guided and amplified by decision intelligence becomes a genuine source of differentiation.
Be a Disruptor
Competitors are flooding the zone and are likely to continue to, thanks to technological innovation and eroding barriers to market entry. Additionally, it’s not just who is entering the market, but how the market itself is changing. For banks, this is putting pressures on both growth and margins. To keep pace and regain ground, the time is now for banks to take a careful look at the product shelf through the eyes of a disruptor. Leverage decision intelligence engines to get those products in front of the right customers at the right time. And finally, empower personnel to differentiate delivery in the last mile where the algorithm is still no match for the human touch.
Decision & Action Takeaways
Decision to be Made | How to parry the incursion from disruptors by applying decision intelligence to the complex task of delivering the right product or service to the right customer at the right time. |
How It Affects Total Customer Value | In a low-growth environment, ceding frictionless convenience to fintechs, which increasingly have banking charters, puts the entire customer franchise at risk of decline. |
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Expected KPI Lift |
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