The rise of the overbanked and the opportunity to serve them

Meet Alvin, a Silicon Valley executive in his late-30s. Alvin has accounts with three banks, an online brokerage account and has borrowed from no less than nine lenders in the past five years.

In today’s world, why wouldn’t he? Quick and easy enrollment processes, fee-free offers, mobile apps to keep on top of things and competitive shopping information make finding and maintaining several open accounts with multiple financial institutions free and easy for Alvin.

Financially literate, technologically savvy and affluent, Alvin is a member of the overbanked.

The overbanked are consumers who hold open deposit accounts with three or more financial institutions. According to Dennis Chira, an Oliver Wyman survey in January 2016 showed the overbanked account for ~10 percent of the banking population, have an annual household income of ~$170,000 and hold household assets of ~$900,000.

Alvin, and the millions of overbanked like him, consumes financial services in a wholly new way. Fueled by technological advances that allow for unprecedented access and choice, the overbanked mix-n-match offerings from various providers to create a customized, bespoke portfolio of financial services. For checking, the overbanked consumer typically holds a primary account with a larger institution that offers convenience and scale.

When it comes to savings, there are multiple accounts — a basic savings held alongside the checking to serve as a holding tank prior to transfers, and usually two or three high-yield online accounts with money shifting between institutions to capture the highest available interest rates. And there is usually an investment account with an online brokerage likeCharles Schwab, and perhaps one with an innovative fintech startup like SigFig or Acorns.

This may not sound extreme in an app-driven world characterized by daily interactions with a multitude of service providers. However, the overbanked consumer’s eager willingness to leverage multiple service providers to customize their financial picture will challenge the as of yet largely undisrupted domain of traditional banks.

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