While most banks think they need a new digital account opening process, the reality is that most banks need a new digital onboarding process. Despite all of our technological progress, it’s the analog process where the most massive failures are. To this point, we just mystery shopped two renowned banks, Umpqua and Citibank, and in both cases, we were met with adjunct failure. Here at CenterState, we are relooking at our digital onboarding process in hopes of getting it right. In this article, we provide financial institutions our universe of partners that we are evaluating, our criteria and five lessons we learned from other banks that have proven successful.
Get The Process Right
While the technology behind digital account opening isn’t great, it is not bad either. Technology is not the largest problem here. The biggest problem to solve here is how to create a process that supports digital account opening either online or via mobile. As a spoiler alert, if you are trying to take your current paper process and just digitize it, you will fail almost 100% of the time. Every bank we interviewed reported problems when they copied this approach.
The other major strategic failure is to avoid creating a conflict with your branch system. Whenever you incent the branch for opening up accounts and don’t include digital, your bank will fail almost 100% of the time. Far too many banks set themselves up for a natural conflict and then scratch their heads why the process doesn’t work.
Present statistics show that almost half of the digital account opening customers either want to talk to a person or would benefit from speaking with a banker. As such, this fact needs to be built into the process and the branch either needs to be incented to help support digital, or another customer service channel needs to be created.
Banks should also be clear about how they will be using their digital account opening process. It works best if the same process and technology are used online, mobile or in the branch. In other words, if a customer comes into a branch, the banker will access the same platform and process that the customer can access online. In this manner, the customer experience is consistent and banks gain economies of scale. If not, banks must expend almost an endless amount of energy preventing channel conflict and confusion.
Banks would also be served well to document, track and manage to a set of benchmarks. Almost 40% of digital accounts are abandoned, and 90% of digital accounts fail to meet the profitability and engagement goals of the originating bank. The average digital account takes 17 minutes to open with the best in class banks able to have their customers do it in under five minutes. These, plus the number of accounts open digitally, the average balance, average profitability, and average engagement are all critical metrics that should stay in the forefront.
One - Stop Thinking Like A Banker – The Minimalist Approach
For example, one major key to account opening is to actually get the account open. If you ask 90% of bankers what does it take to satisfy the regulations to open an account, they will give you a long list of items to include signature verification, multiple forms of identification, and the list goes on. The reality is that it takes very little information to get an account open. More to this point, what the bank wants is a funded and active account. The risk for opening up any deposit account isn’t for bad actors to move money in, but to move money OUT. As such, if you restructure your process to allow for the simplest account opening and funding possible, you can now go to work to reduce risk and satisfy the regulation. In other words, break the process into two or three steps, and get the account open as fast as possible.
Once opened, both parties are now motivated to complete the process, and you can ask the tougher, regulatory-driven questions in Phase 2 after the account is already funded. Further, it is important to study what the regulations SAY and what your interpretation of what the regulations say. These are often vastly different. While the regulations stipulate, and it is a mandatory risk practice to verify identification and signature, there is nothing there is no regulation that requires that person to come into the branch to do it manually. Ironically, the technology exists that makes it far easier and less risky to handle verification digitally than in-person. Despite that, many banks have interpreted the regulations of requiring an in-person visit and have written that into their policies so it is now gospel.
Two - Allow For Easy Funding
Funding is by far, the largest impediment to digital account opening. The more avenues a customer can fund the account, the more accounts you will open. High abandonment rates are often a result of limited funding options. While inter-bank account-to-account transfers are by far the easiest for all parties, assuming that this is a new relationship, here is our data on the cumulative impact of multiple funding methods. You can interpret the chart below as if you require a branch visit, you will experience an approximate 73% abandonment rate. However, if you allow for the customer, to fund the account via branch, check, electronic transfer, debit and credit card, you can get your abandonment rate down to 18%.
Three – Use Existing and Third Party Data
It is no surprise that the number of questions you ask and abandonment of the process is highly correlated to the tune of greater than 65%. If you can use your existing information on the customer and use third-party data, abandonment can drop to as low as 12%.
Four – Gamification and Progress
When choosing a partner to provide a digital account opening and onboarding solution banks should give serious consideration to the functions that promote the completing of the application and the onboarding of the customer. Further, it should ensure that the onboarding process is similar online and offline. If a customer fails to have the required information when opening up an account in the branch, they should receive the same notifications and follow up as if they stopped the process online.
In addition, letting your customer know where they are in the process is extremely helpful and has proven to jump satisfaction scores. Digitally, this can be done with a simple progress bar. In the branch, this can be done with verbal and email updates about the progress.
If a particular digital vendor doesn’t support follow up (most don’t), the bank needs to figure out how to kick off an email or text automation campaign to not only handle follow up but also work on cross-selling and education. Since this is a best practice, banks need to consider how they are going to integrate their digital process with other tools such as their CRM system and email automation application.
Five – Education (Customers and Staff)
Perhaps one of the most critical points of success is making sure you have an education program around digital account opening. This comes in two parts, one for the customer and one for the employees.
For the customer, your application or your process needs to inform them what documents are going to be required BEFORE they start the process. Customers that have the required information are three times more likely to complete the process than customers that are not ready.
Banks also need to help set expectations about the length of the process and the breadth of the process. A material portion of abandonment occurs when a customer expects opening up a particular type of account, such as a joint, trust or business account, only to find out two screens into the process that they cannot.
For the employee, if they are not consistently trained and kept updated on best practices, they will be slow to suggest customers go online and open accounts. Knowledge about account opening is a perishable skill and with the technology changing fast, employees need refreshers and updates frequently throughout the year.
Putting This Into Action
Digital account opening has underperformed in our industry, and it is largely the result of banks not thinking through both the digital workflows and the digital workflows as it touches the existing analog process. Banks should first consider the customer experience and journey when optimizing their process and then figure out how the process can be modified to suit the bank’s needs.
Subprocesses such as follow up, how to use the data for marketing, handling application abandonment, how to help those customers that don’t qualify for an account, benchmarks to monitor success, and integration into other systems such as esign, identity verification, CRM and others merits thought upfront to avoid problems in arrears.
Every bank will need to handle digital account opening, and it is only a question of when your bank thinks it is the right time to balance customer demand, risk, and expense.
We have taken the culmination of the above and the entirety of our experience and research and have created the below matrix that we will be using to upgrade our digital account opening and onboarding process. We publish or quantified approach in hopes of saving other banks time and to garner feedback from banks and solution providers on how we can improve.
Submitted by Chris Nichols on May 06, 2019