Digital account opening (DAO) goes hand-in-hand with online banking. However, some credit unions and banks ask consumers to finish the final steps in person. Others deliver a less-than-ideal account opening experience. As a result, users abandon account registration or turn to nontraditional financial institutions. In this article, we’ll explore the importance and benefits of offering or improving your online account-opening process while examining how DAO supports user experiences.
Digital Account Opening: An In-Demand Banking Feature
Consumers want accessible financial services tailored to their lifestyles. Often, this means mobile-friendly applications and seamless DAO methods. According to Oracle Financial Services’ Global Retail Banking Survey in 2018, 60% of surveyed consumers “want to open a bank account online.”
Then the pandemic sped up demand. A FICO poll of 14,000 users from 14 countries notes, “52% of respondents were more likely to open accounts digitally compared to a year ago.” Furthermore, the Bank Administration Institute states that 58% of Gen Zers prefer to open a deposit account via desktop or mobile app, and 79% of Millennials say they have opened one online. In comparison, 63% of people aged 57 or older prefer to open deposit accounts at a bank or credit union.
To meet this demand, a Cornerstone Advisors report finds, 23% of respondents “plan to invest in digital account opening objectives” in 2021. Additionally, OneSpan’s report, The State of Digital Account Opening Transformation, says, 35% of financial institutions focus on DAO goals to avoid losing business.
Poor Experiences Negatively Affect Financial Institutions
A poor digital account-opening experience is risky for banks and credit unions. It may lead to fewer account sign-ups or referrals. Moreover, users may be less likely to use other bank or credit union services with a complex DAO process.
The Digital Banking Report finds that online account openings have an abandonment rate of 19%. Higher rates typically correlate with longer processes, as indicated by the Digital Banking Report and Deloitte. Also, OneSpan shows that “60% of respondents agree that poor customer experience” is the top reason for abandoning the online account-opening process.
Deloitte says that people who had less-than-superior online account-opening experiences were also less likely to recommend the institution to family and friends or buy extra products or services at the bank.
Benefits of Offering an Account Opening Process Online
Consumers value financial services that provide convenience and security. An online account-opening process can offer both. In return, banks and credit unions earn consumer trust and loyalty while gaining a competitive edge.
Several other advantages exist:
- Lower costs: American Banker’s podcast on “The What and Why of Digital Account Opening” says the acquisition cost for a non-digital user is $138 per account, versus $77 for a digital user.
- Improved customer experience: Secure yet fast and simple DAO methods give people a choice and control over how, where, and when they bank.
- Revenue growth: American Banker’s podcast also notes that financial institutions in the digital account-opening market saw 16% growth, whereas non-digital organizations had a 9% decrease in revenue growth year over year.
- More efficient operations: Banking automation reduces manual workflows and potential data errors. This frees up staff to focus on consumer-facing tasks.
- Increased user base: Digital account-opening methods mean your credit union or bank can accept applications 24/7. Without time constraints, it’s possible to attract and convert users even after business hours.
Building an Effortless Digital Account Opening Process
Financial institutions lacking online account-opening tools may miss opportunities as demand increases. To create a user-friendly remote account-opening process, banks and credit unions must select tools that:
- Simplify data entry using automation technologies
- Support instant account funding
- Allow for online application signing using an electronic signature tool
- Deliver prompt account approval
- Reduce or prevent application abandonment
Consequently, many banks and credit unions connect with fintech companies. According to Cornerstone Advisors, 48% of banks and 42% of credit unions “have partnered with fintech startups over the past three years.” Doing so can lower IT costs and speed up the rollout of new remote services.
Explore Online Account Opening Solutions
Consumer demand for online tools will continue to grow, and institutions must keep up. Indeed, there are challenges to adopting a remote account-opening process. But the benefits are significant. Improving your online process helps you connect with consumers and stay competitive.
Enhance experiences at your bank or credit union by partnering with Lumin Digital. We’re the only digital banking partner to offer a cloud-native and fully integrated digital account opening solution. Read how Consumers Credit Union in Michigan is seeing the impact today. Or contact us to discuss digital account-opening solutions.
Jessica Elliott is a business writer and communications consultant who develops insights from data collection, observation, and analysis that enable clients to envision their future while taking immediate action. With 24 years in public-facing roles, she understands how to connect the dots so that professionals can develop their billion-dollar idea into total market visibility.