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Addressing the Digital Account Opening Experience (Part I)

Alex Jimenez

Managing Principal, Financial Services Consulting, EPAM Continuum
Blog
  • Financial Services

Recently, we defined six interconnected trends that we see driving change in the retail banking industry. One of those trends is the need to provide consumers with what we refer to as Next Generation Experiences. As consumers encounter increasingly personalized experiences elsewhere in their lives, they expect their banks to adopt a similar approach: combining the ease of digital with a human touch. 

The characteristics of these Next Generation Experiences include: 

  • Guided customer journeys that are simple but complete 
  • Personalized and proactive advice 
  • Consistency throughout all channels and types of transactions 
  • Safe and reliable experiences 

Some of the key questions to ask when defining a strategic vision for Next Generation Experiences include:  

  1. When customers are shopping for a bank service, are you providing them what they need to make a decision? Are you giving them a reason to choose you?
  2. When they are buying your product, is the process simple, personalized, and easy? 
  3. When they are using your services, are you providing them easy and personalized processes? 
  4. When they have new needs, are you giving them proactive advice?  

These questions often prompt a laundry list of ideas, challenges, possibilities and capability gaps. However, when we focus on a single experience, such as digital account opening, it is fascinating how widely the industry is missing the mark. As such, I’ll be taking a deep dive into the digital account opening (DAO) experience in a two-part series. First, I’ll set the stage by exploring the current state of DAO and then, in part II, I’ll address how solve for its challenges.

The Current State of Digital Account Opening

In general, opening a new digital deposit account should be a simple process. From a holistic point of view, the process should include:

  1. Step by step instructions with details of what’s required before starting the application; progress meter; minimal data entry and pre-fill whenever possible to minimize cognitive load
  2. Identity verification – human questions and biometrics that catch the “bad actors” while letting the customer that wants to bank with you through 
  3. Customization of the product, such as choosing to get a debit card or checks and setting up preferences
  4. Confirmation that all information that was captured is accurate and complete
  5. Upon approval, which should be quick, funding of the account
  6. Finally, moving to the onboarding and fulfillment process

Yet, the DAO experiences of a decade ago, which many banks continue to offer today, were designed as an alternative to opening an account at the branch. The process is built around know your customer (KYC) principles and identification routines that don’t reflect current technology capabilities and customer expectations. The application processes have also become bloated with questions that aren’t required to open an account – likely due to someone within the organization having an idea to capture as much information about the customer upfront for some future use that never materialized.

We have reviewed dozens of digital account opening processes from large, regional, and community banks as well as credit unions. As we explored these processes, and assessed discussions with bankers regarding their DAO practices, we uncovered problems with their approach or lack thereof. We catalogued these issues into four categories: strategy, data, customer-centricity and financial.

Digital Account Opening Pain Points

Strategy

We see little evidence of banks defining their target customers, whether through their websites before the customer even clicks to apply, or within the application process itself.

There is no differentiation between the products offered digitally or at the branch, making it clear that there is no specific consideration for a digital experience.

The lack of differentiated digital process and products often results in pitting delivery channels against each other. We even heard of one bank’s digital-only brand that was shuttered after the branch team complained that they were losing business to their digital brethren.

As far as the technical and customer experience strategy is concerned, the typical approach has been to jump from vendor to vendor in search of the best customer experience. Instead of looking for a single platform, banks instead roll out disparate “best-in-class” solutions by product line (i.e., deposits, credit cards, personal loans, mortgages, home equities, small business loans, etc.), building a Frankenstein’s monster of digital experiences.

Customer-Centricity

As noted earlier, while banks say they are customer-centric, DAO processes are built around other priorities. In some cases, the digital process is merely an automated version of the branch process. Such an approach ignores the ability to define a process that focuses on a customer’s experience.  

We also found some processes that do not allow for exceptions. For example, if the applicant doesn’t make it through the risk management part of the process, there is no recourse. Or if there is one, it is onerous.

In many cases, we also found funding processes that were very limited. The bank has been able to get an applicant through the tasks of choosing a product, entering all necessary data, and being approved. At this point in the process, there is no excuse to limit the way that the account is funded. 

Another deficiency is the lack of a well-thought-out, curated and personalized welcome process. Arguably, this is the most important step in the DAO process. This is a key moment to thank the customer, welcome them to the bank and follow up with a series of communications introducing the customer to additional products and services, and ultimately to make a human connection. 

In instances where the digital process was decent, we were underwhelmed by the lack of follow up. As an example, one bank’s process required an additional “application” step to be able to access digital banking. In another case, it took nearly eight weeks for customers to receive a debit card. Many banks failed to have basic follow up communications after an impersonal welcome email.  

Data

Despite having a great amount of data about existing customers and the ability to gather data from third-party providers, banks do not exhibit an understanding of digital customers and their behaviors.

Many banks lack a view into their process. When asked where abandoned applications happen within the DAO process, few banks were able to pinpoint it. Equally disconcerting is the small number of banks that track pull-through rates or other process metrics. Unlike branches, we found a low percentage of banks that have well defined digital account opening targets.

Financial

From a financial view, banks are leaving money on the table by not optimizing the process for their customers from the very first impression. In many cases, the risk management that is deployed isn’t minimizing fraud despite the heavy friction built into the process.

If all, or even most, of these issues are addressed, then banks will see increased pull-through rates which translate to increased revenues from generating more new customers and deepening their share of wallet with existing customers.

While some studies indicate that digital-originated accounts tend to be less profitable than those originated at the branch, other studies show that when lifetime value is considered, the inverse may be true. Re-thinking the experience and enabling the customer to apply for multiple products with one application, fund their account in real-time, and offering a robust welcome series will result in more engaged customers.

How To Address These Issues

In Part 2 of this series, we will address how to design a DAO process that meets demand. We will also examine examples of best practices we uncovered in an industry analysis.

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