A Javelin Strategy & Research report issued today finds that one in four U.S. adults tried to open an online account in 2010. Many of these attempts failed; case in point: less than half of applicants succeeded in opening and funding a checking account.
Javelin’s research shows that the number of consumers applying for checking accounts has dropped for two consecutive years, and consumer dissatisfaction is a critical concern. Mark Schwanhausser, senior analyst, multichannel financial services, and primary author of the report, notes that, “Far too often, the first experience many consumers have with a financial institution is punctuated by frustrating delays, offline interactions and outright rejection. Newcomers — who, in a shift from previous years, are now the largest group of online account applicants — are the most likely to abandon the process. This is a cautionary tale to both banks and vendors.”
According to the Javelin researchers, financial institutions can upgrade their account opening and funding issues by selecting the right vendors. In the 2010 Online Account Opening report, Javelin ranks nine products from eight vendors — Andera, CashEdge, Fidelity National Information Services, Fiserv, MeridianLink, Online Resources, uMonitor (Parsam Technologies) and Yodlee — based on factors such as connections to core providers, the breadth of accounts that can be opened, the ability to open and fund legitimate accounts in real time and the tools they offer to help applicants sever ties with their previous banks or credit unions. The combination of Andera’s account-opening and Yodlee’s account-funding capabilities received Best in Class honors from Javelin with CashEdge being a strong near-term challenger.
The report found that:
• The number of consumers applying online for accounts has dropped since the peak of the financial meltdown.
• Javelin estimates $654 million in operational savings for the banking industry through automating the online account-opening process, which costs banks one-fourth that of opening accounts manually in branches.
• Financial institutions can develop deep relationships with consumers who apply online; nearly half of those who apply online for a checking account also apply for a savings account.
• Young consumers, African-Americans, Latinos and affluent customers show heightened use of online applications and should be key marketing targets of financial institutions for online account opening.
“Online account opening is an essential offering for financial institutions looking to attract young adults. In the past year alone, four in every ten Gen Y consumers — those who are 11 to 31 years of age (Javelin typically focuses on consumers who are at least 18) – applied for an account online,” said Mary Monahan, managing partner. “Online account opening is in its infancy; only about 1,400 financial institutions — a fraction of the potential marketplace — have installed one of the account opening/funding products we reviewed. It will increasingly become compulsory for financial institutions to enable time-constricted, tech-savvy consumers to open virtually all accounts online.”
Javelin’s 2010 Online Account Opening report is based on data collected online between March 2008 and March 2010 from three random-sample panels totaling more than 10,340 consumers. It also incorporates interviews and surveys of eight online account-opening vendors and 13 executives at financial institutions with online account opening installed or in process.