Oh, the application process. We can’t avoid it, and yet, we can’t quite seem to fix it. It’s just one of those things that continues to be a bottleneck for banks and a test of patience for customers.
But as processes became increasingly more digital, there was a glimmer of hope that we’d finally have a more efficient application system. Finally, banks could eliminate long paper-based forms and the need for in-branch visits and enable customers to fill out and submit applications online.
Unfortunately, however, we’re not quite there yet. Long paper-based forms have been replaced with unmet expectations as the new barrier to application submission, and seamless sign-up is far from the current reality. Instead of ditching the paper forms at the branch, users are now abandoning the application process online, and at an astronomical rate—possibly as high as 97%, according to some studies. Losing customers at that rate, especially so early on in their user journey, is a loss that no bank or credit union can afford.
But, unlike trying to force someone to fill out a paper application, mitigating online application abandonment is much more doable—and the rewards are significant. Your financial institution can expect the relationship to last 17 years on average for each new end-user that doesn’t abandon the process.
Even in this era of fintech challengers and mobile neobanks, 96 million U.S. end users have never switched their primary accounts to a new bank or credit union. So, when your business depends on converting new users online, how do you make sure they don’t abandon the process from the start? Here’s how to be ready for new business at all times.
What Causes Bank Application Abandonment?
Several reasons can cause abandonment, but most often, it results from the end user’s unmet expectations. Whether they’re trying to open a new account or apply for a loan online, end users rightly expect the process to be faster online than in-branch. Additionally, they often assume that creating a new bank account online will be as seamless as creating their new gym membership online.
But unlike a gym, banks and credit unions have higher regulatory and compliance standards governing their processes. Identity verification has to be infallible, and the information collected has to be accurate. These additional factors inevitably contribute to the following barriers for the end user when it comes to applying online:
- Time: The most common complaint with any online application is that signing up takes too long. A study by Signicat found that 18.45 minutes was the signup sweet spot. Any longer than that, end users will likely get frustrated in the signup process and abandon it.
- Friction: The key deterrent for in-branch users is the number of people waiting in line. Too many people in line often lead to someone abandoning the process. Similarly, for online users, while the process is more manageable, their catch is having to make too many clicks. It’s a nuance in the psychology of progress—the easier a function becomes, the more each micro-obstacle becomes an issue.
- Incompatibility: Not all devices are created equal, and the location you’re using while signing up matters. Users might abandon the process because their device isn’t compatible, their physical location is excluded, their phone number is in the wrong format, or they reach character limits when inputting their name or address. The notion of a one-size-fits-all signup form is more fanciful than many financial institutions may think.
- Identity verification: Considering only one-third of Americans have a valid passport, the expectation that all potential customers have a valid ID required for signup is limiting. It’s more likely that a large group of potential customers is simply missing the necessary ID to access financial products and services.
Why High Abandonment Rates Matter
The pandemic accelerated the adoption of digital banking, but the digital onboarding experience offered by many banks and credit unions wasn’t necessarily ready. Around two-thirds of new end-users trying to sign up in the first few months of the pandemic were abandoning. Now that the shift towards self-service banking is likely permanent, banks and credit unions need to recognize onboarding as a vital part of user-relationship management. It’s the first impression an end-user has of your institution, after all.
The process needs to be personalized, transparent, and convey a sense of progress. Help should be offered to end-users who get stuck during the process, and any questions submitted should be responded to promptly, with relevant solutions to help the end-user through the process.
What Is the Cost of Abandonment to Banks and Credit Unions?
Historically, there’s been a tendency for financial institutions to see online abandonment as simply the cost of doing digital business. Accepting high failure rates was just par for the course. That complacency no longer has a place in banking.
With digital competitors nibbling away at market share, traditional banks and credit unions cannot afford to lose end users at the sign-up stage. For credit unions especially, who have always had the edge over banks regarding personalized service, it’s essential that the digital onboarding process doesn’t lose that familiar touch. At the same time, banks and credit unions cannot afford to take risks. Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations add considerable friction to the account creation process. Onboarding a new end-user with incorrect or incompliant data can be more costly than losing them during sign-up.
How To Reduce Application Abandonment Rate
Minimizing the number of users who quit during sign-up requires combining innovative technical tools and old-school psychology. A simple progress indicator that shows end-users where they are in the sign-up journey, for example, psychologically gives the end user awareness of the process and what’s expected of them to complete the task. Even better, allowing users to save their spot at any time and return later without having to start over again provides them with a sense of control over the process.
A few more tips for tackling abandonment:
- Automation: Use pre-filled forms that pull personally identifiable information (PII) from trusted sources wherever possible, instead of requiring end users to input data manually (which allows for errors).
- Cross-channel functionality: A user often starts on a phone but finishes on a laptop or switches between devices. Allow them to sign in and complete the process across multiple devices.
- Digital identity verification: Today’s smartphone typically has the biometric tools to complete secure, multi-step authentication. Users can take a photo or video or provide an iris scan or fingerprint for real-time identity verification. If you ask your end-user to bring a physical ID to a branch, one-third of people will abandon the process.
- Page optimization: More than 50% of visitors will abandon a site if it takes more than 3 seconds to load, especially on mobile. Simplify your site’s design to minimize the number of requests it has to make for images, scripts, and non-essential plugins. Ensure that your site is responsive across all platforms, including mobile.
Sign Up More Users With Lumin
With a banking solution from Lumin Digital, your financial institution can help your potential customers open accounts anywhere. As one of the first cloud-native digital banking platforms to offer the digital account opening feature, we’ve made it easy for your users (current and potential) to open a checking or savings account in under five minutes with a few clicks. This action doesn’t require a separate, third-party vendor to complete, and the new account can even be funded with a debit card, making it even easier to make initial deposits. Our digital banking solutions are making application abandonment a thing of the past. Contact Lumin Digital today to learn more.
The Financial Brand – What The Heck Is Wrong With Online Account Opening?
YouGovAmerica – Only one-third of Americans have a valid US passport
Credit Union Times – Solving the Mystery of Online Application Abandonment