Picture this: Newlyweds want to open a joint checking account online. They’ve chosen your bank because they value the local network and they believe your fees are fairer than those of the big banks.
They get to your website and start the online application, where they encounter multiple screens, lengthy disclosures and numerous requests for documents. They close the laptop and decide to return to the task later. But prospective customers like these rarely do.
When a customer begins an application, they’re sold on the bank. But a poor online account opening experience drastically diminishes the value of your marketing efforts, community outreach, and your digital presence.
The time and effort it takes today’s customers to open an account online serves as a proxy for the ease of doing business with your bank in general. Though many consumers may value your local presence and services, there’s always a point at which they’re likely to give up in favor of added convenience elsewhere.
The average community bank has an online account opening flow that takes between eight to 10 minutes to complete; and one in five banks takes longer than that. The best practice in retail banking, by comparison, is three minutes or less.
In the digital world where consumers expect instant results, every minute added to your online account opening flow increases their likelihood to abandon the process. Only 8% of consumers successfully complete an account application, start to finish, according to Javelin Research. For every 500 potential new customers that visit your website to open an account, only 40 actually end up doing it. If a branch performed at this level, a bank would likely take swift action to better train, staff, and resource the branch. Understandably, community banks and credit unions don’t have the resources that money-center banks have at their disposal to build best-in-class digital account opening — but fortunately, they don’t need to.
Cutting down the account opening process to three minutes is possible at most community banks. By automating the majority of the process, software can streamline the experience for prospective customers and your bank. Here are four ways technology can cut the time to open an account:
Switch to a non-documentary based Know-Your-Customer program: Financial institutions can comply with regulatory requirements without utilizing documentary methods to verify customers’ identity. In fact, the Federal Financial Institutions Examination Council has standing guidance allowing non-documentary-based customer identification programs. Asking for documentation (like a scan of a driver’s license) can cause up to a third of prospective customers to abandon the application, with negligible fraud reduction.
Eliminate knowledge-based authentication for more-robust digital identity checks: You can perform KYC/AML checks in seconds by taking information collected from a user and comparing it to identity information available in the public and private spheres. These checks can encompass information that is directly inputted (such as name, birthday, Social Security number, address, phone number and email) or passively gathered (including browser type, IP address and linked bank account information). This approach not only reduces fraud, it significantly decreases the time to open an account.
Book accounts directly to the core using store and forward functionality: Many core banking systems have periodic downtimes, while today’s consumers expect technology to work 24/7/365. Technology that integrates with any bank’s core should have the ability to circumvent the core’s downtime through a process called “store and forward.” This enables your customers to complete the application process without added fraud risks, even when the core is down.
Convert PDF disclosures to HTML: Not only are PDFs impossible to make ADA-compliant, they often require the customer to leave your bank’s onboarding screen. On top of that, your terms of service should never be the first step of your account opening process. It’s best to reserve the intimidating legal jargon until the end. The Conference of State Bank Supervisors’ 2019 national survey found that 35.4% of community bankers cited funding costs as the biggest influencers on profitability over the next 12 months. It’s a highly competitive market for core deposits, and big banks are taking market share at increasing rates. By optimizing the time to open an online account, community banks and credit unions can better compete and grow their businesses faster.