Addressing the Digital Account Opening Experience (Part 2)

In the first part of this series, we took a deep dive into the current state of bank digital account opening (DAO) in the U.S. and identified the common pitfalls that retail banks face. In this second part of the series, we’ll examine DAO best practices, why DAO processes need to be reimagined and how to address the issues we uncovered.

Who’s Getting it Right?

While earlier we focused largely on industry pitfalls, it’s not all bad news. We did find DAO processes that reflected characteristics of the “Next Generation Experiences” we sought. However, most of these digital experiences were offered by neobanks or FinTech firms, as well as a handful of existing traditional banks.

For example, neobanks Chime and Varo offer intuitive and simple processes that can be completed in less than five minutes. Both are mobile-first experiences. Chime pre-fills as much information as possible based on GPS and the applicant’s mobile number. Both neobanks set up digital credentials during the account opening process. 

Goldman Sach’s Marcus is also a very simple process. Unlike Chime and Varo, the experience is largely housed in a single screen, reflecting a more responsive design. The difference in design (mobile-first or responsive design) reflects the difference in target customers for these institutions. Marcus allows funding via various methods, including mobile remote deposit capture. Varo, on the other hand, doesn’t even offer a funding step in their process. Instead, account funding is handled as part of their onboarding process. While we’re skeptical about this approach, it does represent a rethinking of the standard process. 

From the established banks, we liked Chase and Bank of America’s (BofA) flexible approaches. Chase offers a mobile-first experience similar to that of the neobanks. BofA’s process is responsive, like Marcus. We liked BofA’s account comparisons and their offerings that reflect a strategy toward digital-leaning customers. 

The process to emulate is Apple Card. While we understand it is a credit card and not a banking account, the intuitive nature of the process is worth examining. Design thinking clearly guides a process that takes less than three minutes for an applicant to complete. Like the Apple Card, banks could make a debit card available immediately upon approval and loaded into a digital wallet.

Why is Digital Account Opening Important?

If you’ve gotten this far, we can only assume that you understand that digital account opening in retail banking is important. However, if you aren’t certain as to why, here are a few stats for consideration:

• According to the Forbes Advisor-IPSOS survey from March 2022, 78% of Americans prefer to bank digitally.
• Yet many retail banks aren’t making even the simplest account opening processes easy. Most banks report that it takes more than five minutes to open a simple checking account per a study by the Financial Brand and Newgen.
• In the same study, one-third of the banks say that 75% of their digital account opening sessions are abandoned. 
• The 2021 ACA Study found that, across industries, consumers are willing to pay more for better experiences. Focusing on financial services specifically, up to 51% of banking consumers would be willing to spend more for a better customer experience. According to that same study, 25% would be willing to spend 10%+ more. 

The bottom line is that embracing digital account opening yields several benefits:

• A well-thought-out process will increase pull-through rates and overall customer engagement.
• By removing reliance on manual processes, employee engagement can also increase.
• An efficient process will result in cost reduction from the decreased handling of support calls and fraud reduction.
• Finally, it will result in revenue generation by attracting more new clients, promoting loyalty and increasing opportunities for cross selling.

How to Fix It

When customer-facing processes are in-person, the bank relies on the banker’s abilities. Now that digital delivery is becoming the main avenue for customers to engage with banks, it’s clear that banks need a holistic approach to defining the experience – one that doesn’t simply focus on account opening. A new approach should hinge on:

1. Defining an organization’s strategy
2. Developing a deep understanding of customer needs
3. Setting objectives 
4. Designing new experiences using human-centered design
5. Adopting agile methodologies
6. Deploying enabling platforms and technology

Developing an organization’s strategy requires having a clear vision or purpose. Strategy defines the target model, customers and some level of performance. We have seen banks that say they are mobile-first organizations but aren’t willing to prioritize mobile experiences.  

To understand customers, banks must do the hard work of talking to them. Surveying customers or asking front-facing customers for feedback isn’t enough. Ethnographic studies of customer behaviors give insights that can’t be obtained by having bankers talk to each other.  

After a vision is set and customer needs are understood, banks must define the objective of the new experience. For DAO, common objectives include increasing pull-through rates and engagement, as well as a resulting improvement in associated revenues. Objectives should have defined targets with specific timelines. 

The design of new DAO processes should leverage the learnings and best-practices described earlier. Banks should use human-centered design tools like personas and customer journeys to help them define the new experience. User experience (UX) testing will allow a bank to understand how customers will behave with a new design. A beautiful design can enamor a banker, but if customers don’t understand it, it may prove useless. 

It is not necessary to develop a target experience in totality before the new experience is deployed. Banks should adopt agile methodologies that allow them to iterate. They can roll out a minimum viable product (MVP) and iterate toward the target experience. Such an approach requires the bank to prioritize design specifications and features.

Even the most tech-savvy banks or FinTechs don’t often build a new DAO experience from scratch. Banks should look to leverage available platforms, starting with their content management system (CMS) and customer relationship management (CRM) platforms all the way down to risk management tools for KYC and authentications. Other platforms include low code or no code business process management, funding/payments processors, live chat and chatbots.

That’s a Lot

If this seems daunting, it’s because designing a new DAO experience needs to be approached as a comprehensive process. However, so long as that process starts with a focus on the customer’s needs and a commitment to leveraging today’s available technology to align that process with the overall organizational strategy, then banks can be confident they are approaching the problem from sound footing.