How Banks Can Combat Share-of-Wallet Attrition

As digital financial services expand, traditional banks and credit unions face growing competition from fintech firms, neobanks and tech giants. While banks may not see an immediate loss in accounts, they risk losing customer engagement which leads to a declining share-of-wallet. To maintain long-term profitability and customer loyalty, financial institutions must take proactive measures to strengthen relationships, enhance engagement and reinforce their value proposition.

The Rise of Alternative Financial Providers
Neobanks and fintech firms have made significant inroads into consumer and small-business banking. By offering fee-free accounts, seamless digital experiences and early direct deposit, they attract a diverse customer base — ranging from younger, tech-savvy individuals to older, affluent clients looking for convenience. Without the overhead of branches or banking licenses, these digital-native competitors offer an enticing alternative to traditional banks, with many boasting higher customer satisfaction and recommendation rates.

The impact of alternative financial providers is substantial. Chime, the leading U.S. based digital-only provider, along with PayPal and Square, now make up 10% of the primary checking account market. Fintech firms continue to expand beyond checking accounts, offering payment solutions, lending and small-business services — chipping away at traditional banking relationships. Peer-to-peer (P2P) payment platforms further weaken banks’ positioning, with nearly half of consumers using at least one P2P service, according to Rivel’s research.

Compounding the challenge, major tech giants have entered financial services with well-established brand trust and innovative platforms. These companies pose a serious competitive threat, leveraging technology and customer data to provide hyper-personalized financial solutions.

Signs of Attrition and Retaining Customers
Many banks focus on lost accounts as a measure of attrition, but true share-of-wallet erosion often occurs when customers shift their financial activities elsewhere — without closing their original accounts. For example, a customer may maintain a checking account with a traditional bank but turn to fintech providers for loans, credit cards or wealth management services.

Banks must monitor key indicators of churn, such as reduced account balances, lower transaction activity or shifts in credit usage. By leveraging predictive analytics, financial institutions can proactively identify customers at risk of defection and take action before losing them entirely.

Life events also play a crucial role in banking relationships. Transitions, such as entering the workforce, buying a home, starting a business or welcoming a new child, significantly impact financial needs. Banks that proactively support customers through these stages can strengthen loyalty. For instance:

• Gen Z customers need guidance on budgeting, credit building and tax planning as they transition into financial independence.
• New parents benefit from educational resources on 529 savings plans, estate planning and tax implications of their growing family.
• Small-business owners require advisory services to navigate financing, cash flow management and digital payment solutions.

Proactively addressing these evolving needs can position banks as trusted advisers rather than just transaction facilitators.

Winning the Share-of-Wallet Battle
With increasing competition, banks must shift their strategies to retain and expand their share-of-wallet. Key steps include:

1. Enhancing personalization. Banks should leverage customer data to deliver tailored products and services, ensuring that offerings align with individual financial goals. Generic banking models no longer suffice in an era of highly personalized digital experiences.

2. Investing in customer engagement. A decline in account activity, fewer in-person visits and even a drop in customer support inquiries can signal disengagement. Financial institutions must adopt a multi-channel approach, combining digital convenience with personal interaction. Regular check-ins and proactive outreach can re-engage customers before they drift to competitors.

3. Competing on value, not just price. While fintech firms attract customers with low fees and high convenience, traditional banks can differentiate themselves by emphasizing security, trust and long-term financial partnership. Banks should market underutilized services like treasury management, bill pay and merchant solutions—areas where many customers remain unaware of available offerings.

4. Optimizing marketing investments. Rather than focusing solely on acquiring new customers, banks should allocate more resources toward nurturing existing relationships. Loyalty programs, financial education initiatives and exclusive customer benefits can deepen engagement and encourage primary banking relationships.

All these suggestions should be completed with feedback from your own customers and in context with competitor insights. Setting the baseline of your own successes and failures allows the bank to grow over time, assuring positive experiences can carry forward with positive word of mouth.

Future-Proofing Banking Relationships
The financial services landscape is evolving rapidly, and traditional banks must adapt to retain customer loyalty. Instead of relying on legacy strategies, institutions must proactively safeguard their market share by strengthening engagement, enhancing personalization and staying ahead of emerging trends.

By leveraging data-driven insights, banks can identify and address potential churn before it occurs. A renewed focus on customer-centric strategies will not only protect against share-of-wallet erosion but also foster stronger, more resilient banking relationships in an increasingly competitive environment.