I. Introduction
To what extent have depository institutions been losing ground to fintech companies and other nonbank financial service providers in the markets for consumer banking products and services over the past decade? How might this evolving competitive landscape be affecting consumer financial well-being?
These questions have potentially important implications for both bank merger policy and for consumer financial regulation.[1] While the evidence put forth to date points to an expanding role of nonbanks overall, details are sketchy and the picture incomplete.
This research note examines data from the Federal Reserve Board’s Survey of Consumer Finances (SCF) to gain new insights into trends in consumers’ selection of bank versus nonbank providers of banking and financial products. (In this context, consumers are family units, as the SCF is a survey of U.S. families.) Specifically, we investigate market share trends in the markets for three credit products: personal loans, credit cards and personal lines of credit (excluding lines of credit secured by home equity, commonly known as home equity lines or HELOC). In addition, we investigate market share trends for checking accounts, mutual funds and brokerage accounts.
Little information has been available on nonbank versus depository institution shares of credit cards, checking accounts, non-HELOC credit lines, mutual funds and brokerage accounts. There is a larger but still modest volume of studies and reports on competition in markets for personal loans. Those generally rely on account-level data from the major consumer credit reporting agencies and measure market shares in terms of loan counts or loan balances.
This note seeks to provide a more complete picture of competitive trends in these markets. Our use of family-level data from the SCF offers several advantages in this regard. First, some lenders may not report to all three major credit bureaus or may not have done so historically, potentially affecting the market shares observed in bureau data. Second, whereas previous analyses have been limited to unsecured loans or other slices of the personal loan market, we examine the market as a whole.[2] Third, we offer insight into whether consumers are substituting nonbank for bank credit (direct competition between substitute providers) or are adding new credit accounts from nonbanks to complement their existing bank credit (competition on the margins). Fourth, we present new evidence on trends in nonbank market share by consumer risk segment.
Loans and deposits are generally considered the core business of banking. In each of the three lending categories examined, the analysis indicates that nonbank market share increased considerably between 2016 and 2022. As of 2016, 11.7 percent of consumers with a personal loan, 3.2 percent with a personal credit line and 2.4 percent with a credit card had obtained at least one from a nonbank; by 2022, the respective shares had risen to 21.6, 16 and 8.1 percent. In addition, we find that nonbank checking accounts are a small (only 2 percent as of 2022) but gradually growing niche segment.
Drilling down, by credit category, to the segment of consumers with only a single borrowing or account relationship, we find that nonbanks’ share has expanded materially in this segment specifically, in each credit category. This suggests that consumers are substituting nonbank for bank credit, underscoring that nonbanks merit greater recognition from regulators when conducting merger analysis.
Moreover, for credit cards and personal loans, larger increases in the market share of nonbanks are observed among consumers who are higher-risk—based on a proxy measure of credit score—and who have two or more accounts. For instance, as of 2022, more than a quarter of higher-risk consumers with three or more credit card accounts had at least one issued by a nonbank, as compared to only 5 percent in 2016.
The overall rise in nonbank share between 2016 and 2022 in the lending product categories is evidence of stronger competition from nonbank fintech providers. The fact that larger increases are observed within higher-risk segments suggests potential financial inclusion benefits but also raises concern about targeting of more financially vulnerable segments of the population.
On the savings and investment side, nonbanks have long been the dominant channel for consumers seeking to obtain brokerage accounts and mutual funds. That said, selling investment products has, since the 1980s, been part of the “business of banking,” and indeed has been recognized as such by the regulatory agencies in allowing banks to engage in these activities.[3] Our analysis finds that since 2016, banks have lost further ground to nonbanks in this domain as well—further confirmation of an increasingly competitive environment for banks that would not be revealed by simply looking at a deposit concentration index.
As of 2016, 43.3 percent of consumers with a mutual fund and 30.5 percent with a brokerage account had obtained at least one from a bank. By 2022, banks’ shares had fallen to 36.6 and 26.6 percent, respectively.
The higher-risk indicator can also be applied to the savings and investment side, as it is correlated with age and income and can be considered a summary measure of financial capability. We find that in the case of mutual funds, banks’ share of the high-risk consumer segment has increased, despite their drop in share overall. This finding suggests that banks may be playing an increasingly important financial inclusion role, facilitating access to mutual funds across a wider range of consumers.
Note that auto loans and residential, home purchase and refinance, mortgages are omitted from this analysis, based on the following considerations. The market share of depository institutions in auto lending has exhibited little variability over recent years, despite fintech developments.[4] In the case of residential mortgage markets, it is well known that other than in the jumbo and HELOC segments, depository institutions have been largely sidelined by nonbanks.
The remainder of the discussion is organized as follows. In the next section we present a review of the existing literature on recent competitive trends in consumer lending. The subsequent section describes the SCF data. This is followed by an overview of the trends in nonbank shares, which are next examined in more detail using classification trees and then through estimation of multivariate regression equations (linear and logit). The final section offers concluding remarks.
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[1] For example, Federal Reserve Governor Bowman has argued that the bank‑merger review frameworks are outdated and fail to adequately account for fintech competition, nonbank credit providers and digital distribution channels (Bowman 2022).
[2] The appropriate market definition for assessing competitive effects of a merger depends on which products are considered close enough substitutes to belong to the same market. For many consumers, the decision on how much to borrow is joint with the decision of how to finance the loan—an unsecured loan versus a larger secured loan. Thus, it would seem appropriate to consider secured and unsecured personal loans as belonging to a single market.
[3] Many banks offer investment products to their customers, typically through separate investment or wealth management divisions or through affiliated brokerages. The mutual fund options they offer may include both proprietary funds (managed by the bank) and third-party funds. Banks benefit from cross-selling these products in at least two ways – first through fee income, and second by serving as a “one-stop shop” that enhances customer convenience and strengthens the customer relationship.
[4] The combined share of banks and credit unions has varied narrowly around 53 percent since at least 2016, per Ellencweig and Sridharan (2023), p. 4, and Zabritski (2025), p. 7.