A recent trend in the retail banking market is the increasing demand by customers for an online component to their banking relationship. Traditionally, demand deposit accounts (DDA) have been opened by customers inside their local bank branch. However, customers have recently started to open new accounts online in growing numbers, a trend that will only increase as customers continue to look to do their banking online. According to a recent Mercator Advisory Group research report on DDA underwriting and account opening, almost 25 percent of all U.S. consumers have attempted to open a bank account online, and slightly more than 30 percent of young adults have tried to open a bank account online.
eCommerce companies, such as Amazon, have raised the bar for the online customer experience, making it increasingly faster and easier and providing additional tools and capabilities such as mobile apps, device recognition and services like one-click purchasing. As a result, customers now have heightened expectations when it comes to all online transactions. The interest in online account openings is primarily driven by millennials*. In order to capture this new breed of customers, financial institutions, specifically in the DDA space, are challenged to make sure a customer’s experience meets his or her expectations, while protecting their organization against fraud.
To deliver the ideal customer experience – smooth and friction-free – for new account openings, financial institutions need to re-examine the type of information and technology they use. They should leverage external risk and fraud data to detect identity fraud, and use predictive analytics to determine overdraft risk. Financial institutions must also balance these risk management processes with customer expectations. Automated onboarding processes that place a premium on arriving at optimal decisions without introducing friction, such as ID scanning and other mobile image capture technologies, are becoming essential.
There is a lot of work that has to be done behind the scenes to design a friction-free customer experience. Banks are no longer competing exclusively with other financial institutions—they are competing with the Amazons of the world because of the customer experience expectations those entities have created. To effectively and efficiently onboard a new online DDA, financial institutions need to seek both agile technology partners and data partners.
I recently participated in a webinar hosted by the Consumer Banking Association on new solutions for online onboarding along with executives from Earnix and Zoot Enterprises. To learn more about online onboarding, you can listen to the webinar here.
Patrick Reemts is Vice President of Credit Risk Solutions at ID Analytics.
*Source: Ron Mazursky “DDA Underwriting and Account Opening Process”, Mercator Group, July 2014.