Digital onboarding was supposed to solve the problem of end users giving up on applications for financial services because of long paper-based forms and the need for in-branch visits. Unfortunately, seamless sign-up is far from the current reality and the abandonment rate could be as high as 97%, according to some studies. That’s a loss that no bank or credit union can afford, especially since it comes so early on in the user journey.
The rewards of addressing abandonment rate, on the other hand, are significant. Earn a new end user and your financial institution can expect the relationship to last 17 years on average. Even in the era of fintech challengers and mobile neobanks, 29% of U.S. end users have never switched their primary account to a new bank or credit union. Here’s how financial institutions can be ready for new business at all times.
What Causes Bank Application Abandonment?
Abandonment ultimately results from unmet expectations. Whether the objective is to open a new account or apply for a new financial services product, such as insurance or credit, end users rightly expect the process to be faster online than in-branch. In addition, they might assume that online account creation will be as seamless as it is for their gym, eCommerce retailer, streaming service or social media platform.
The problem for banks and credit unions is that they have a higher regulatory and compliance standards to aspire to. Identity verification has to be watertight and information collected has to be accurate. These inevitably contribute to the following barriers for the end user:
- Time: The most common complaint is that sign-up takes too long and asks for too much mandatory personal information. A study by Signicat found that 18.45 minutes was the signup sweet spot. Beyond that, end users are likely to see the sign up process in a negative light and abandon it.
- Friction: The key obstacle for in-branch users is the number of people waiting in line. For online users, it is having too many clicks to make. It’s a quirk of progress that the easier a process becomes, the more each micro-obstacle becomes an issue.
- Incompatibility: Users might abandon because their device is not compatible, their location is excluded, their phone number is in the wrong format or their name or address has too many characters. The notion of a one-size-fits-all signup form is more fanciful than many financial institutions may think.
- Identity verification: Consider that only one-third of Americans have a valid passport and it’s clear that there are vast cohorts of potential customers who are 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 to be 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, after all.
The process needs to be personalized, clear and with a sense of progress. There has to be the offer of help for end users who are stuck, and a timely, relevant response when questions are asked.
What Is the Cost of Abandonment to Banks and Credit Unions?
There’s been a historical tendency for financial institutions to see online abandonment as the cost of doing digital business and with that, an acceptance of high failure rates. That complacency no longer has a place in banking. With digital challenger banks nibbling away at market share, traditional banks and credit unions cannot afford to lose end users at the sign-up stage. For credit unions in particular, which have always had a perceived edge over banks when it comes to personalized service, it’s important that digital onboarding doesn’t lose that familiar touch.
At the same time, banks and credit unions cannot afford to take risks either. 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
Limiting the number of users who quit during sign-up requires a combination of innovative technical tools and old school psychology. A simple progress indicator, for example, is an example of the latter in action. Show end users where they are in the sign-up journey and they will feel back in control. Even better, allow them to save their spot and return later without having to start over again.
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: It’s quite likely that a user will start on a phone but finish on a laptop, or switch 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 to provide real-time identity verification or provide an iris scan or fingerprint. Ask your end user to bring a physical ID to a branch and a third will abandon it.
- Page optimization: More than 50% of visitors will abandon a site if it takes more than 3 seconds to load, especially on mobile. Simplify design to minimize the number of requests the site has to make for images, scripts and non-essential plugins. Ensure that your site is responsive for mobile too.
Sign Up More Users With Lumin
With Lumin Digital, your institution can integrate multiple vendors seamlessly through a single platform yet still provide multi-layer security at the point of entry without friction. Maintain the tailored, personal relationships you already have with your end users and extend the range of services and products you offer onto a cloud-native digital platform. Our security controls are aligned to industry best practices so you can offer smooth, seamless onboarding without compromising on safety and compliance. Contact Lumin Digital today.
Credit Union Times – Solving the Mystery of Online Application Abandonment