Online/digital account opening: A bridge and a moat

Strong customer acquisition is imperative for financial institutions looking to grow. Unless the bank or credit union is planning merger and acquisition activity, growth at most institutions relies on new loan accounts and increased deposits.

However, especially since COVID, many people don’t want to visit a branch to fill out a paper application to open an account. Business owners, especially, don’t want to take time away from their revenue-generating businesses to handle such a task in person. 

'Brings ease of digital to your first impression'

Instead, customers or members want a paperless application process that allows them to easily open an account in less than 10 minutes. And they want to be able to open the account from work, from home, from the car, during lunch, during the kids’ bath time, at night when they can’t sleep, or whenever suits their schedule best. Customer expectations are likely a major reason the phrase “open a bank account online” is searched on the Internet more than 22,000 times a month.

It's a safe bet than when Silicon Valley Bank received more than $40 billion of deposit-withdrawal requests in a single day, customers weren't looking to open a new account for the funds by visiting another financial institution's branch. 

Payment apps offered by non-bank providers like Venmo, PayPal and Cash App are also increasingly offering the option for customers to store cash in their accounts and use it to fund later purchases. This, in effect, allows the app to function like a traditional depository account, cutting out the bank or credit union. The Consumer Financial Protection Bureau (CFPB) recently reported that customers are storing billions of dollars through these services outside of their federally insured bank or credit union account. 

All of this means that when someone wants to add a new account, having the choice to do so via any device, at home, or in a branch will make your bank or credit union an option for that consumer or business. And online account opening can be an opportunity to provide a very positive experience at the start of the customer or member relationship.

Online digital account opening “represents a transformation of the very beginning of the funnel,” CCG’s Drew wrote. “Or put another way, it brings the ease of digital to your first impression.” Financial services providers are using digital account opening as a way to drive differentiation and achieve a competitive advantage, she said.

As early as August 2019, about 1 in 5 Americans already banked with digital-only banks like Chime or Aspiration, according to a survey by comparison platform Finder.com. That’s 54 million people. Another 22.5 million said they intended to open a digital-only account in the coming months.

Many online account openers are younger and more affluent than people who bank exclusively with institutions that have a physical, local location. And with financial institutions across the U.S. seeing core customer bases aging, these people represent opportunities to generate new deposits and new loans, and to sell other products that reinvigorate the bank or credit union.