Which Digital Bank Is Winning? (Answer Inside)

Feb 26, 2023

For most folks, going to the bank has become a thing of the past. No more heading to the teller with a paycheck in hand. These days, employers direct deposit that cash straight into our bank accounts… Friends send us money for lunch with the swipe of a finger… And paying for coffee is as simple as tapping your phone on a card reader.

The world has gone digital and there’s no turning back.

Banks have adapted to this new reality by offering mobile and online banking. But the truth is, millions of Americans have already realized they can skip those traditional institutions altogether with all-digital banking providers:

In fact, 57% of millennials and 64% of Gen Z have financial accounts with a nontraditional banking institution.

This comparison breakdown from Bankrate shows why, citing significantly higher savings account interest rates as just one compelling reason to go digital:

Source: bankrate.com

Mobile Banking Is Growing

According to LikeFolio data, mentions of consumers banking on mobile devices have increased +40% YoY and +12% QoQ, and are continuing to pace higher:

Convenience is key here.

Who needs a bank teller when you can take care of all your banking needs with just a few taps on your smartphone?

So… Which Nontraditional Institution Is Winning?

Ally (ALLY) seems to be in a slump.

LikeFolio data confirms that key consumer demand metrics are slowing for the digital banking platform.

Mentions of consumers utilizing the digital banking platform have decreased -12% QoQ and -15% YoY:

Demand is slowing and the stock price seems to have stalled out around $30, close to its IPO price of $25 back in 2014.

Meanwhile, competitor SoFi (SOFI) is getting a boost:

Demand for SoFi is sporting increases of +30% QoQ and +6% YoY.

After its IPO in late 2020, SOFI’s stock price surged to an all-time high that it hasn’t quite reached since.

But for us, that just means SOFI shares are on sale.

I named SOFI as one of my favorite stocks in a LikeFolio podcast episode last October. (Watch it here to find out why.)

In addition to rising demand, SoFi customers are overwhelmingly happy — even taking a seven-point sentiment lead over Ally:

LikeFolio website traffic data confirms that SoFi is gaining popularity — and fast. Visits to SoFi’s website are soaring +46% YoY, on track to close the gap on ALLY’s lead of +5% YoY.

Bottom line: SoFi is still an underdog in this fight, but LikeFolio is fascinated to see where this name is going in the long term.

Enjoy your weekend,

Andy Swan

Andy Swan
Founder, LikeFolio