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2011 Online Account Opening: Faulty Process Hobbles FIs in the Battle for Customer Acquisition, Profitability and Retention
Javelin Strategy & Research, Oct 2011, Days: 35
Online account opening plays an important role because it can shape the first impression that consumers develop when they try to establish or deepen an online relationship with a financial institution. Javelin data shows, however, that barely more than half of online applicants for a basic checking account succeed in opening and funding the account. The remaining applicants are rejected, abandon the process or are forced to visit a branch. Further, failure and abandonment rates are alarmingly high for applicants who are new to an FI or are less techsavvy. The primary reason consumers apply online is to get it done fast, yet Javelin’s analysis and a “secret shopper” survey of 15 banks and credit unions details a raft of frustrations that stem from limited application menus, unfriendly user interfaces, web glitches, human intervention in a supposedly automated process, and other shortcomings. This report also offers a glimpse of the future, with a case study of mobile account opening at Workers’ Credit Union of Fitchburg, Mass.
Primary Questions
- How many consumers attempt to open various types of financial accounts online?
- How likely are applicants to succeed at opening an account online?
- How do success rates compare among consumers who use online banking, FI bill pay, and mobile banking, according to Javelin’s segmentation of Moneyhawks™, Online Banking Loyalists™, Malleable Traditionalists™, and Cautiously Content Consumers™?
- How do success rates compare between existing customers vs. newcomers to an FI?
- How do giant banks and community banks stack up?
- What motivates consumers to apply for accounts online?
- What are the key frustrations of applying for accounts at a branch vs. online?
- How do frontline bankers influence the success or failure of online account opening?
Methodology
This report is based on data collected online from 5,102 consumers who were primary or shared financial managers in March 2011. The overall margin of sampling error is ±1.37 percentage points at the 95% confidence level. The survey targeted respondents based on representative proportions of gender, age, income, and ethnicity compared to the overall U.S. online population. Javelin’s analysis examined consumers based on banking behaviors for online banking, bill pay, and mobile banking.
To draw starker conclusions, Javelin focused on the 83% of consumers with defined behaviors. The report does not examine the 17% of consumers who exhibit infrequent behavior or inconsistent use of online banking, bill pay, or mobile banking. (See Figure 1.) This segmentation was first detailed in “How to Attract and Keep High-Value ‘Moneyhawks’: Increase Profitability Through Targeted Multichannel Service Messaging” (Javelin Strategy & Research, July 2011). The findings in that report prompted Javelin to expand its definition of Moneyhawks to identify consumers with a mindset of closely monitoring and managing their money through a variety of channels and services with unusual frequency. In several previous reports, Moneyhawks were defined as consumers who received financial alerts on a 90-day basis.
Javelin also examined two sets of FIs, using website research and calls to customer-service representatives when necessary, to assess the types of accounts they offer for online applications:
The nation’s 10 largest depository banks according to American Banker’s ranking as of March 31, 2011: Bank of America, BB&T, Capital One, Chase, Citibank, PNC, SunTrust, TD Bank, U.S. Bank, and Wells Fargo.
Five banks and credit unions that have either a technology-oriented focus or focus on serving customers who rely on nontraditional banking channels: Ally Bank, Desert Schools Federal Credit Union, ING Direct, Navy Federal Credit Union, and USAA.
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