The ability to open financial accounts digitally—online, via mobile device, or (preferably) both—is in high demand among bank customers. The traditional account opening process is usually a cumbersome one that requires a visit to the branch to close the deal. But today’s customers—especially younger ones—are branch-averse and want to do their banking activities online. It stands to reason, then, that banks currently lacking digital account opening capability should seriously consider adding it soon.
The Business Case
To build a business case for digital account opening, financial institutions have only to look at data showing how many customers use the web or mobile device to explore financial products; how many initiate the account-opening process online; and how many abandon the process when they’re required to visit a branch to complete it.
But the business case can be based on more than just increased sales. Digital account opening saves costs, of course, since digital services are much cheaper than the cost of maintaining a branch. Some of the financial institutions we’ve worked with have said their digital account opening solution produces more accounts than their best branch. Moreover, the capability expands a financial institution’s reach beyond its physical footprint. Digital account opening also presents opportunities for targeted cross-selling; based on data analytics, banks can identify other products that might appeal to individual customers and offer those during the account opening process. The customer can then research the product(s) and sign up for them online, all during the same session.
Why Some Banks Are Lagging
At present, most top-tier banks and credit unions offer online account opening, but regional and smaller institutions are lagging. Even the larger institutions’ solutions are not necessarily optimized for mobile devices. Some of these banks are too focused on servicing to turn their attention to sales and account opening, while others are concerned about compliance and security issues. But if these latter FIs buy their solution from a reputable vendor, it should already be built for compliance. Banks merely need to make sure they do their due diligence before selecting a solution.
Keep It Simple
Whatever solution banks choose, it should be simple, because the point is to make account opening virtually frictionless for customers. It should have the fewest questions and screens possible and require minimal contact information from the customer—just enough that the bank can follow up if the customer abandons the process midway. Wherever feasible, customer information should be prefilled.
To keep it simple, the solution’s capabilities need only include:
- Verification/authentication of the customer’s identity and contact information, typically via challenge questions and/or credit check.
- Electronic deposit acceptance so that accounts can be funded immediately.
- Provision of requisite disclosures.
Speed is also essential. The attention span online is 8-12 seconds a prospective customer will quickly abandon if not smooth. The solution does not need to offer the ability to add account beneficiaries and other extraneous information. The financial institution can collect this information on the back end, after the account has been opened.
Solving a Major Pain Point
The account opening process is a major pain point for customers—especially small business customers. Establishing and authenticating signatories, providing P&L documentation, and all of the other tasks involved are often complicated and burdensome.
But when financial institutions set up digital portals for these activities, account opening becomes much more painless. Even for account types that require multiple steps by nature, an account opening solution can simplify things by regularly letting customers know where their applications are in the process and what information is still needed from them. An institution can get all of the information it needs—while still making it easy for the customer.