In the U.S., debit cards are the most popular method of payment, so it’s not surprising that many fintechs are trying to enter the debit card market. For companies focused on P2P payments such as PayPal, Venmo (owned by PayPal), Square, and savings apps like Acorns or Money Lion, the leap into the debit card business is easier, given that these fintechs already have the payment infrastructure as well as the user base.

Consumers today are open to using debit cards from fintechs. In fact, a new report by CB Insights shows that 60% of US bank consumers said they were willing to use financial products from a tech firm they already use. That number rose to 73% among consumers between ages 18 to 34, a.k.a. the fintech sweet spot audience — millennials. These debit cards typically emerge as a progression from the fintech’s basic account product. This is because it enables the fintech to let the consumer link their debit spending to that company’s current account rather than their bank account somewhere else. 

Personalization is the name of the game for fintechs. And by partnering with banks like Green Dot, Bancorp Bank, or Sutton for a banking license, fintechs can keep their focus on maintaining an agile tech stack to provide a better level of personalization in their debit card offerings thank many of the larger banks. For example, almost all fintech-based debit cards offer some variation of features like no or minimal ATM fees, specially tailored spending rewards, direct deposits (except for Venmo, all the others: Square, PayPal, Acorns, SoFi, Stash all allow direct deposits). A number of companies, such as Marqeta and now Stripe, can help companies offer card products.

Keeping the focus on technology also allows these fintechs to deliver a seamless digital experience, making it easier for consumers to use the debit cards, but also to sign up for them. This influx of fintech based debit cards and current accounts should worry banks, according to the report, which states, “daily use and sleek, user-friendly platforms will increase adoption and customer loyalty for fintechs, making it easier for them to roll out new products. The more products fintechs can incorporate into their apps, customer needs for traditional banks’ services will decrease. 

For fintechs, offering such products will increase their relevance in the consumer’s day-to-day lives, possibly making the banks less important for the customer when it comes to transactions like payments, spend rewards and money management.

On the subject, the CB Insights report states:

With millions of existing customers and large millennial user bases, fintechs are in a prime spot to expand their product lines. Debit spending through checking accounts is the easiest way to do this, as younger consumers are attracted to the transparency and instantaneous nature of debit spending. This will help convert MAUs into DAUs, as customers are drawn to the apps to monitor daily spending and rewards. While current products — like investing and P2P money transfer platforms — do not require daily attention, frequently used products like a debit card can easily make these fintechs an integrated part of their clients’ daily lives.

Read the full report here. 

Aside from debit cards, the report found that cash was the second most popular method of consumer payment, followed by credit cards.