From processing efficiencies to competitive differentiation, online account opening offers myriad benefits to retail banks. A successful online account-opening program, however, requires the right products and capabilities, including fraud protection and real-time decisioning.
Q: What are the benefits to banks of online account opening?
Mark La Penta, MetLife Bank: Online account opening offers a way to lure some degree of wallet share away from another institution. The availability of online account opening may prompt people to adopt an "I'll give them a try" mentality, particularly around promotional offers available through the Web channel only. For our direct model, online account opening is imperative; however, it also makes sense for traditional retail banks in order to attract new demographics above and beyond branch-wed customers.
Alenka Grealish, Celent: Financial institutions that implement automated online account opening stand to capture client assets more quickly through automated workflow and exceptions processing, increase account-opening completion rates, reduce processing errors and costs associated with the manual handling of applications, improve cross-sell ratios, and standardize the decisioning process. Automation lowers origination costs. Moreover, a financial institution is able to extend its market reach beyond its physical footprint. In addition, online account opening helps banks attract different customer types -- in particular, younger generations and tech-savvy customers.
Sanjeev Dheer, CashEdge: Online account opening increases customer acquisition, increases close rates, reduces cost, improves risk management and enhances user experience. It is a must-have for retail banks because many consumers demand self-service options for opening accounts. The banks benefit from the operational efficiencies of leveraging their online channel as a sales and account-acquisition tool. Citibank attributes a 500 percent increase in accounts to its online account-opening solution, but only a 57 percent increase in full-time employees. The online channel also enables smaller banks and credit unions to compete for a wider footprint nationally.
Barb McDonald, FIS Decision Solutions: Online account opening is an effective way to acquire new customers with minimal cost and an account base more willing to use faceless channels. Typically, this is a segment of consumer loyal to a channel more than a bank brand.
Q: What kinds of systems and procedures must be in place for an online account-opening program to be successful, and to avoid any security, fraud and privacy risks?
La Penta, MetLife Bank: Simplicity is the key. The customer experience must be clear and efficient. At the same time, we must gather enough information to feed technologies that validate the customer and ensure Patriot Act compliance. The messaging in the experience must be that while we value your business, we value your security even more.
Grealish, Celent: Security and fraud prevention are paramount to the process. The customer ID-verification step relies heavily on innovations in multifactor identity verification. Customer information provided during the data-capture step is verified against internal and third-party data sources in order to authenticate the customer's identity. In the decisioning and account-approval step, the outputs of the various fraud and identity checks are fed into an aggregate decision model. At this point, financial institution-specific rules are applied to drive the automated approval and exception-management process. The automation of the account-approval process is a key benefit of this step, allowing routine applications (i.e., those passing the various ID and fraud check thresholds, which can represent from 75 percent to 85 percent of applications received) to be processed with no manual intervention, leaving only the exceptions for bank staff to handle manually.
Dheer, CashEdge: Minimum functionality includes single-session account opening, electronic signature, electronic funding, a back-end tool to manage the application queue, audit trails and detailed reporting. Online account opening and funding requires compliance with the rules and regulations that govern financial institutions. Managing risk is the single biggest obstacle to handling this in-house -- more so than the technology. The goal is to strike the optimal balance by preventing fraudulent transactions without disrupting the user experience for legitimate customers.
Q: What drives the success of an online account-opening initiative?
Grealish, Celent: Beyond the underlying technology, getting online account opening right depends a lot on putting the right product in front of the customer. When using the online channel to originate applications, the simplest products experience the lowest abandonment rates. Financial institutions should carefully consider product complexity from the perspective of application length (which will impact abandonment rates) and fulfillment requirements when making their choice. Beginning with nontransactional deposit accounts is the preferred approach.
Dheer, CashEdge: Enabling online account funding is a critical success factor. Just as important is the user experience and real-time decisioning. Some institutions open 20 percent of their accounts online, but if customers cannot fund their new accounts in the same online session, the drop-off rate is huge. Without the funding component, financial institutions that offer this service are leaving their newly acquired assets on the table.
Q: What is the next phase of online account opening?
La Penta, MetLife Bank: Technologies around tracking origination of transactions on the Web will continue to increase protection against fraud. We don't see account opening on mobile devices -- that technology will need to gain adoption in the transactional or payment space first. Another area of future improvement is in a universal enrollment process. Despite available technology, it's not easy to open multiple accounts simultaneously or even add an additional account for an existing customer. Most products have different processes, making the account-opening process complex and time-consuming.
Grealish, Celent: We are only at the beginning of the adoption curve for the automated online opening of deposit accounts. Celent estimates that fewer than 2 percent of U.S. financial institutions offer automated online account-opening capabilities today. We expect this to increase to between 18 percent and 20 percent by 2010. The next phase involves both a new channel (mobile) and products (e.g., home equity line of credit).
Operationally there will be change, as well. While some institutions may choose to initially forgo back-end integration in order to improve speed to market, integration with core systems ultimately must be implemented for financial institutions to fully reap the benefits of online account opening. Most banks will opt for batch integration, while the more sophisticated will go all the way with real-time integration to core systems. A broader trend that will impact online account opening is the emergence of clear standards and policies related to electronic signatures.
Dheer, CashEdge: We expect the application to expand in two directions: multiproduct and multichannel. The goal is a universal enrollment platform, enabling institutions to open any type of account in any channel using one platform. Other capabilities may include integrating marketing services into online account-opening applications to enable banks to attract more prospects online and quickly convert them into customers. While mobile is an exciting channel, the complexity and steps involved in opening new accounts may be a barrier to adoption in that channel.
McDonald, FIS Decision Solutions: In addition to new channels such as mobile devices, there is an untapped opportunity in cross-selling products to existing account holders though integrating preapproved credit offers and targeted invitations to apply for accounts using demographics. Institutions should be looking at ways to capitalize on their online banking platforms as a sales tool in addition to a service vehicle.