The Call Is Coming From Inside the House

Community banking's fintech reckoning, and what the data says to do about it

For Twenty Years, the Threat Had a Different Name

For most of the last two decades, community bankers filed fintechs under “watch, but don’t worry.” Interesting apps, thin balance sheets, venture money that would eventually run out. Fortunately, that type of thinking is now rapidly changing. In Bank Director’s 2026 technology survey, community bank leaders ranked fintechs like Block and PayPal as a bigger competitive threat than the big national banks: 58% flagged fintechs as a top threat, versus 48% who said the same about JPMorgan and Bank of America. Neobanks such as Chime worried 40% of respondents on their own line item.

That is a genuine reversal, not a rounding error. For most of the last decade, the assumed threat hierarchy ran Chase down the street, then other local institutions, then perhaps a fintech app. Now the app is ahead of Chase in the threat rankings. The competitive picture has changed.

The Growth Gap Is Not Close

Boston Consulting Group’s 2026 Global Fintech Report puts global fintech revenue at $504 billion in 2025, up 22% year over year, more than four times the growth rate of incumbent financial institutions. Deposits and trading products, traditionally a bank’s home turf, were among fintech’s fastest-growing lines, up 30% and 38% respectively. McKinsey’s parallel fintech research with QED Investors sizes the market slightly differently at $650 billion in 2025 revenue, growing 21%, and projects it could nearly triple to $2 trillion by 2030 if current trends hold.

Put the two firms’ banking research side by side and the picture sharpens. McKinsey’s Global Banking Annual Review shows the traditional industry still had a strong 2025 (net income hit a record $1.3 trillion) but by one measure, mature fintechs and neobanks have already claimed 17% of industry revenue, and return on tangible equity is heading the wrong direction, from 12.4% in 2024 to 11.8% in 2025. Fintechs spent two decades as an irritant. In 2025, per McKinsey, irritation became something more acute.

None of this is really about apps being shinier. It’s about unit economics catching up to hype. The largest public fintechs improved EBITDA margins by 400 basis points in a single year, and 74% of them are now profitable, up from 68% in 2024. This is no longer a subsidized land grab. It’s a sector that figured out how to make money doing the parts of banking that carry the least friction and the fewest branches.

AI Is the Accelerant, Not the Optional Extra

If fintech’s growth has a single engine, McKinsey and QED Investors name it directly: “AI is the accelerant behind most trends in this report.” Fintechs are using it to build products in weeks that used to take years, to serve customer segments that were never economically viable under the old cost structure, and to compress operating costs to a point legacy models simply can’t match on price. BCG puts a number on part of that: fintechs using AI are seeing an observed uplift of up to 5x in developer productivity.

McKinsey’s own framing of what this means for incumbents is blunt: “Early-adopter incumbents are seeing real returns. But for those that have not yet moved decisively, the competitive gap is widening.” For a midsize or community bank, that’s not a research-lab problem. It’s a staffing problem. A $2 billion-asset bank does not have a bench of machine-learning engineers sitting idle, and it shouldn’t try to build one. But “we don’t have the talent in-house” is a reason to bring in expertise, not a reason to wait it out. Waiting is itself a decision, and per McKinsey it’s an increasingly expensive one: “invest for scale or risk progressive irrelevance.”

Where the Fight Actually Is: Your Deposits

Strategy decks love to talk about “disruption” in the abstract. ICBA’s Community Bank CEO Outlook 2026 survey is more specific: nearly 60% of community bank CEOs named deposit growth their single biggest challenge (“the lifeblood of a bank,” as one put it) and one now being fought over on multiple fronts at once.

Fintechs have J.D. Power data on their side. Chime alone captured 12.8% of new checking account openings in the fourth quarter of 2025, ahead of Chase (8.4%) and Wells Fargo (7.1%), and converted shoppers at a 78% rate. On savings, Chime’s conversion rate hit 85%. SoFi converted 83.1% of investment-account shoppers who considered it. J.D. Power calls this pattern “soft switching”: customers not leaving their primary bank outright, just quietly opening the better-performing account somewhere else.

Now add a newer variable. The GENIUS Act’s stablecoin framework is a year old and, per coverage in the ABA Banking Journal, has moved from theoretical to operationally real: stablecoins can “reduce, restructure, or displace bank deposits depending on adoption patterns.” For many community banks, the compliance, capital, and operating demands may make partnership or consortium participation more practical than issuing independently. Which is, not coincidentally, also the realistic path for almost everything else on this list.

Nobody Is Building Their Own Tech

Here’s the good news, such as it is: community bank leadership knows it can’t out-build a venture-funded fintech, and mostly isn’t trying to. One ICBA survey respondent put it about as plainly as it can be put: “There is no way a bank our size could afford to develop its own tech stack.” The strategy that’s emerging instead is fintech-as-vendor rather than fintech-as-competitor: online account opening, treasury management and fraud tools, digital lending platforms, sourced through programs like ICBA’s ThinkTECH Accelerator rather than built in-house. PriorityOne Bank, for one, created a dedicated director-level role for strategy and technology to run exactly that kind of sourcing. It’s a small but telling sign the posture is reaching the org chart, not staying stuck in the IT budget line.

That’s a rational response, and also not a strategy in itself. Bank Director’s survey found 76% of banks still view technology primarily as a cost-efficiency play rather than a growth lever. That’s an important objective, but an incomplete response to competitors focused on customer acquisition. Sixty-nine percent cited integration with legacy systems as their top concern when modernizing, which tracks: bolting a modern account-opening flow onto a decades-old core is exactly the kind of project that eats a budget and delivers a worse customer experience than either system alone.

The Fintech Used to Need You, Now it has a License

For years, the fintech relationship ran one direction: a fintech built the app, a bank supplied the charter, the deposit insurance, and the regulatory plumbing underneath it, and both sides split the economics. That arrangement (banking-as-a-service, sponsor banking, embedded finance, whatever the deck calls it) quietly became real revenue for a lot of community and regional banks. Research from 2024 found sponsor banks attributing as much as 51% of their revenue and deposits to embedded finance partnerships. For some institutions, the fintech relationship isn’t a side project. It’s the business.

The clearest example didn’t wait for a trend piece to name it. On September 8, Chime (the same neobank that’s been the recurring example in this piece, the one out-converting Chase on new checking accounts) announced an agreement to acquire Stride Bank, its longtime sponsor, for $590 million in cash. The deal is expected to close in the first half of 2027, subject to regulatory approvals and other conditions. CEO Chris Britt didn’t dress it up: “We are at a size and a scale when we need to have complete control of our destiny,” he said, adding that the partnership model had slowed Chime down on product launches it wanted to ship faster, especially with AI moving as fast as it is. If completed, the acquisition would reduce sponsor-bank fees and give Chime greater control over its banking infrastructure. It is, in one proposed $590 million transaction, the entire argument of this section.

And it isn’t an isolated move. More than 30 neobanks, digital-asset firms, lenders, and payment companies pursued their own bank charters in 2026, and most have been approved or are pending. The OCC has been moving fast to clear them; median approval time dropped from 166 days to 121 in 2026 alone. Revolut, Nubank, Mercury, and Upstart all picked up conditional de novo bank charter approvals this year; Erebor Bank got the first de novo charter in four years. Circle, Coinbase, Crypto.com, and Stripe’s Bridge subsidiary picked up national trust charters for stablecoin and digital-asset custody. Upstart, Affirm, and PayPal are pursuing charters of their own along similar lines. This is not a handful of edge cases. It’s the top of the fintech industry systematically deciding it no longer needs a bank in the room.

The math explains why. A fintech operating under its own charter can retain more of the economics it previously shared with a sponsor, while taking on the associated capital, compliance, and operating obligations. The partner bank isn’t just less necessary. It’s a cost line the fintech has every incentive to eliminate the moment it can clear the regulatory bar. And the bar is getting lower: the GENIUS Act’s stablecoin framework and a friendlier OCC have both compressed the time and expense it takes to get there.

None of this is catastrophic for every community bank; plenty were never in the sponsor-bank business to begin with. But for the ones that built real revenue on embedded finance partnerships, a fintech graduating to its own charter isn’t a competitive threat in the abstract. It’s a specific, named client walking out the door with the deposits and the fee income attached. Chime’s proposed acquisition illustrates how that dependency can change, although an acquisition is different from a partner simply leaving. The defensible move isn’t hoping your largest fintech partners stay dependent. Assume they won’t. It’s knowing exactly which relationships are exposed, and steering new partnerships toward mid-market fintechs who are years away from affording a charter of their own, not the ones already shopping for one.

The Gap Nobody’s Fixing Yet

The single most alarming stat in the Bank Director survey has nothing to do with technology spend: 70% of community banks have no formal strategy to reach Gen Z customers, the exact demographic fintechs have spent a decade optimizing for. This is not a five-year problem. It’s the pipeline. Earning those relationships early matters, and the soft-switching data above suggests those customers are already voting with a second app on their phone, increasingly one built by a fintech that doesn’t need a partner bank to serve them anymore.

Scaled fintechs increasingly want to look and behave more like banks, full stop. That’s not a community bank’s problem in the way the deposit or charter fights are (a chartered neobank is competing for the same Gen Z customer as anyone else), but it’s one more signal that the line between “bank” and “fintech” is getting harder to draw, in both directions, and that community banks can’t count on regulation to keep drawing it for them.

What Actually Works

Buried in the same ICBA survey that produced the deposit-anxiety numbers is the more useful finding: 72.8% of community bank CEOs see differentiation from competitors as their biggest opportunity, not their biggest threat. And the differentiation they’re describing is personalized service and local market knowledge paired with real technology investment, not instead of it. That combination is defensible in a way that pure scale never will be for a $500 million-asset institution, and it’s the one lane where a fintech’s venture capital doesn’t automatically win.

The institutions that come out ahead over the next few years will likely share 4 traits.

First, they’ll treat technology spend as a growth investment with a return, not a cost center to be minimized. The 24% of banks already doing this in the Bank Director survey have a real head start.

Second, they’ll partner deliberately instead of either building everything or bolting on point solutions reactively; the fintech relationship that works is the one chosen for a specific gap, not the one a vendor happened to pitch well.

Third, they’ll actually build a plan for younger customers, because the deposit base of 2035 is being decided right now, one Gen Z checking account at a time, increasingly at Chime, not at the bank down the street.

Fourth, and most overlooked: partnering solves the technology problem, not the product problem. A vendor can hand you a faster account-opening flow or a slicker app. Nobody hands you the answer to what to price, what to bundle, or which product actually earns that Gen Z checking account instead of merely enabling one. That’s a different discipline, closer to performance management and product design than core integration, and it’s the piece most community banks haven’t brought in yet. The institutions getting real lift from their technology spend are usually the ones who did that homework first: what resonates with which segment, at what price, through which channel, before they went shopping for a vendor. Skip that step and you can build the wrong thing very efficiently.

That happens to be the exact lane MarketView works in at Ceto, pairing performance management with product, pricing, and go-to-market design, so the strategy questions and the technology decisions get answered in the same room instead of two different ones.

None of this requires community banks to become fintechs. It requires taking the threat as seriously as the data now says it deserves, and building the efficiency and growth case with the same discipline a fintech brings to acquiring a customer. The alternative is finding out the hard way, one soft-switched account at a time, that the call really was coming from inside the house.

Sources