2019 may go down in history as the year when virtual banks truly began their ascendency over the old guard of brick and mortar institutions. Fintech is getting large infusions of cash from venture capitalists, and a number of new fee-free virtual banking services, now labeled neo-banks, are coming into the marketplace, attempting to disrupt the established power structure.

The fact that many large banks are now updating their own banking apps to compete with these new services provides proof that they understand the threat virtual banks represent.

Fee-Free Mobile Banking Is the Key

Virtual banks cater to a new generation of young people comfortable with the idea of using their phones to cash checks and make payments. These consumers aren't looking for many of the more advanced services large banks offer and aren't interested in the high fees that come along with these accounts.

New banking startups such as Chime, Aspiration, and Empower are growing at a phenomenal rate. Chime has opened more than two million new accounts and is now adding more accounts per month than leading institutions. Following the trend, Aspiration has opened over a million accounts.

These new virtual banks are starting small, offering simple checking and savings accounts without the fees and deposit minimums normally associated with bank accounts. But universally the plan is to grow into more advanced services, like mortgage loans and credit cards, all without the account draining fees that make standard banking institutions so unloved by today's savvy consumers. And this is finally beginning to make the big banks nervous.

Big Banks Are Getting in on the Action

Banks like Wells Fargo and JP Morgan Chase, which once considered virtual banks harmless mobile apps, are now launching their own virtual banking services, in answer to the growing threat that the neo-banks pose.

Wells Fargo is working on Greenhouse, a mobile banking app that will get rid of many of the fees the bank normally charges their customers. JP Morgan Chase offers Finn, a similar service that they hope will help retain and attract younger customers.

But these institutions have a lot of baggage to navigate and a massive infrastructure that can't pivot as quickly as the young virtual bank startups can. As a result, expect to see even more fee-free banking apps join the fray as this new wave of virtual banks matures.

For additional information, view Rory Brown's website: https://www.rorybrownvirtualbank.com/

About: Mr. Rory Brown has focused on financial technology and investment management for 30+ years. Rory Brown is currently working on a new app that will help consumers navigate online banking. The app will connect clients with the best virtual banks in the world, where they can get comparisons on rates for home loans, auto loans, and more.