How the Pandemic Pushed a Generation of Americans to Discover the Perks (and Risks) of Online Banking

Photo to accompany story about adopting fintech during the pandemic.
Carma Peters (left) helped her mother (center) transition to online banking before her death. The experience led the Michigan Legacy Credit Union CEO to focus on online banking for its customers.

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What if, instead of opening a birthday card from Grandma to find a crisp $20, she hit your Venmo instead? 

This scenario is becoming more likely. Venmo and Zelle have both seen a rise in usage by older age groups during the pandemic.

“Boomers, particularly since the onset of the pandemic, has been the fastest-growing demographic,” says Donna Turner, COO of Early Warning, which operates Zelle, a peer-to-peer payment service. 

Many older Americans have availed themselves of digital offerings, like their banks’ online services, since the pandemic forced an end to day-to-day activities in March. Carma Peters, CEO of Michigan Legacy Credit Union, has seen this trend play out both personally and professionally.

Peters first learned the benefits of setting up older people online when, at 63 years old, her mother started doing her banking online— and continued to do so for the remainder of her life.

“If my mother was still alive, I’d stick her in every branch to talk to people and tell them how easy [online banking] is and the freedom it gives you,” Peters says. “She was able to do it all on her own.”

What started as a way for Peters to help her mom manage her finances more easily and avoid the hassle of going to the bank in her wheelchair spilled into her professional life. Peters decided to invest in more robust online services for the credit union’s clients, and has experienced the trend currently playing out in banks across the country. 

The Trend

Digital and online banking has already been on the rise in recent years, but the pandemic forced large-scale uptake. There was a 200% jump in new mobile banking registrations in April, according to an analysis by Fidelity National Information Services, an international financial services firm. That jump accompanied a 50% drop in branch bank traffic in the same month, according to U.S. banking data firm Novantas. 

For Michigan Legacy Credit Union, the shift to online banking during the pandemic has been dramatic. A 38% increase in online transactions from March to April reinforced Peters’ plan to downsize the credit union’s branch space and refocus on online services.

For baby boomers especially, or roughly those between 55 and 75 years old, the pandemic has been a catalyst for more rapid adoption of online banking and other financial services. 

It started with these older Americans using digital services from their brick-and-mortar bank for the first time. This is happening at banks both large and small, according to six bank executives and leaders we talked to. 

Take mobile deposits as an example: While this has become a basic feature of most banks’ mobile apps, usage by MLCU members over 50 is up 171% since March, Peters says.

“We know we have a 96-year-old using online banking, both desktop and mobile,” Peters says. 

Bank tellers were the most frequently used account access method for Americans 65 and older in 2017. When that option went away this year, online banking forced a major change in routine, including the adoption of peer-to-peer payment apps, like Venmo. 

“This is a sign for how this generation is digitizing in the current situation,” a Venmo spokesperson said.

The shift has been palpable. “Everything they did in person they’re now doing online or even on mobile,” says Allie Fleder, COO of SimplyWise, a retirement and Social Security resource.

While the benefits of online banking go beyond just negating the need to go out in public during a pandemic, there are new risks and challenges as well, which older Americans who are new to online banking might not be aware of.

Going Digital The Right Way

Banking execs contend that an abundance of safety features makes transacting digitally a safer option, but for Americans who have spent more years of their lives without a cellphone than with one, it can be a jarring change. 

“These times can be ripe for bad guys,” Turner says. She warns that isolation, heightened levels of concern, and a shortage of normally-available goods and services combine for a perfect storm of scams. And, unfortunately, seniors are “more susceptible” to such schemes, Turner adds.

Older Adults Technology Services (OATS) is a nonprofit dedicated to helping educate older Americans on safe digital habits with e-learning classes. The classes teach basics like how to open an internet browser, along with more complex topics, like how to use multi-factor authentication, which typically involves confirming a log-in attempt with your mobile phone. 

“The COVID crisis has been a double-edged sword,” says Tom Kamber, Executive Director of OATS. “It’s created anxiety and dislocation, but it’s also driving people to use new tools.”

In general, Kamber recommends older Americans who are new to digital banking seek at least two sessions of support before diving into a new online service. These sessions can be with a family member or teacher, or an online learning tool. If you want to help an elderly person navigate getting online safely, or want to get better at your own online skills, Kamber has some tips:

Get On The Same Platform

If you’re introducing someone to the internet and know they’re likely to call you for help, put them on the same platform as you.

“If you go online in an Apple environment, put them on Apple. If you have an Android, get them an Android,” Kamber says. 

Kamber says it really helps to be seeing the same screen that they’re seeing, and that you’d be surprised how many minor variations there are across devices. 

Be Aware of Learning Styles

For older learners, “the learning curve is shallow in the beginning and then steepens very quickly,” says Kamber. This means that the first few sessions introducing a technology or service can be much longer than expected, but patience is key in the early learning stage.

“I tell people to figure out how much time you think it’s going to take, then multiply that by four,” says Kamber. 

While the introductory phase can drag, Kamber says the basics are essential for the next phase, which is incorporating safe online practices. After that, many elderly users accelerate quickly. 

“After they have all of the knowledge and are ready to do things, the learning curve is going to go super fast,” says Kamber. “The first step is the basics, then the second level is internet security topics.”

Coach, Don’t Do

A mistake many teachers often make is doing something on their own instead of allowing the person they’re teaching to figure it out for themselves. 

“People learn by doing, so helping people practice things and giving them a chance to puzzle through it, with support, is what they need,” Kamber says. 

It’s also important to give actionable goals that can be worked toward. 

“Older learners are super practical,” says Kamber. “What they want is quick, actionable information that will really help their needs.” 

The Upside of Online Banking

If you can help someone bulk up their online presence safely, there are perks and benefits to be had.

Convenience 

Like Peters’ mother found, it’s much more convenient to bank from the comfort of home. In addition to cutting trips to the bank, Peters says her mother benefited from centralizing her finances under one log-in. 

“You only have to remember one log-in instead of every other place you go to pay bills,” Peters says. 

Financial Planning

Peters says setting her mother up with online banking helped take the stress out of managing her finances late in life. 

“When she did become very ill, I didn’t have to worry about her supplemental Medicare policy being paid, or that anything was missing,” Peters says.  “Her Social Security came in, her disability came in, and everything was just automatically scheduled out.”

Setting up online bill pay, which can be configured through your bank’s online services, can ensure that your finances remain in order in the event of a medical emergency or other major life event. 

Saving Money

Online banks can often cut fees that larger brick-and-mortar banks can’t afford to lose. While ditching the comfort of a branch can seem daunting, Fleder says these money-savers are “perhaps most important for people on fixed incomes, particularly those who may be unbanked or unable to access good credit products.”

Americans aged 45 to 65 have an increased willingness to switch to online-only banks as a result of COVID-19, according to data from Varo bank. And when it comes to retirement, “every dollar helps,” says Eric Taylor, Director of UX research at Varo.

How The Local Branch is Changing

The push toward digital banking and fintech by older Americans doesn’t appear to be a fad. 

“I don’t really see us reverting,” Turner says. “We’ve built new muscles, we’ve built new habits, we’ve built new routines.”

But Barry Baird, head of payments at TD Bank, contends that this isn’t a death sentence for branches. For people who have been sticking with their branch over the years, “they want to go in, because it’s their local bank and they know the teller or the clerk,” Baird says. “It’s not about self-service. It’s about human connection.”

For Peters, the decision to downsize Michigan Legacy Credit Union’s branch square footage to focus online is not to eliminate that human connection for clients, because, “we see value in branches, just not as big as they are right now,” Peters says. 

Reinvesting that capital into online services, however, is where Peters sees the most value-add for clients—as was the case for her mother. 

“We understand the challenges facing older people right now,” Peters says. “It’s that pivotal moment in time where we have the opportunity to demonstrate there’s an easier way.”