Online, Onboard and Not On Hold

By Ed Gross

Jim Reuter, CEO of Lakewood, Colo.-based FirstBank, recently shared a remarkable fact about his bank and how his bank opens accounts: “If you start with the lowest performing branches for new consumer accounts and work your way up to the top-performing branch, you have to add up the bottom 53—out of a total of 115—to equal the same number of consumer accounts we open online each month. This is truly online and not over the telephone.”


While that sinks in, a follow-up question: Is that number likely to get larger or smaller?

“Increasingly, customers have the expectation that they can begin a banking relationship online in minutes, and they expect the user experience to be as good as when they make purchases online,” says ABA SVP Christopher McClinton. “That’s a tall order for banks that have account opening procedures to follow.”

More consumers conduct banking via mobile and online channels than all other, more traditional methods combined. According to a survey conducted by Morning Consult for ABA, 40 percent of Americans use the internet (via a laptop or PC) to manage their bank accounts, and 26 percent use a mobile device. Consumers between the ages of 18 and 44 bank primarily through a smartphone. That’s 36 percent of the population, a large portion of which has only just begun to consume banking products.

Mobile dominance

In May 2015, Google announced that searches on mobile devices surpassed those on desktops for the first time. About 18 months later, internet users worldwide became more likely to get online from a mobile device (smartphone or tablet) than from a desktop, according to StatCounter. In June 2017, that same watershed moment was reached in the U.S.: Internet access market share of desktops dropped below 50 percent, eclipsed by the combination of smartphones (42.7 percent) and tablets (8.9 percent).

Turning all that mobile access into mobile business seems like a logical follow-on and that’s exactly what’s happening. “M-commerce,” as it’s called, represented just under 12 percent of total e-commerce dollar volume in 2014; by 2016 m-commerce penetration was 31 percent. In the last six months, 62 percent of smartphone users have made an on-device purchase.

Consumers’ banking habits track with their spending habits, as any bank IT executive or branch manager will testify. According to a survey conducted by FIS, 72 percent of all consumer interactions with a bank are done digitally, via online or mobile banking options. Banks offer increasingly sophisticated mobile apps that facilitate easy transactions, payments and even loan applications. But when it comes to opening new accounts and onboarding new customers, there’s still a big gap in mobile—and that’s where digital account opening, or DAO, comes in.

An introduction to DAOism

What digital account opening is not is when a new or existing customer goes to a bank’s website, fills out an application for a new account or product, and ultimately completes the process by calling, emailing, faxing, or visiting a branch. This is the traditional, browser-based process that has served banks well. It offers a significant efficiency gain over traditional account opening processes, but it can lead to frustration and abandonment on the part of some consumers, particularly the 36 percent who will remain a bank’s customers for years to come.

DAO is the process by which a new account is opened and operationalized from end-to-end on a digital device, such as a smartphone. A consumer can complete the entire process—including funding and selecting multiple bank products—in just a few minutes without direct interaction with bank personnel. A DAO solution is considered omnichannel if it can be started on one device and seamlessly finished on another with no re-entry of data required.

More than a dozen companies offer DAO solutions for financial institutions and many larger banks have chosen to build their own. Here are a few things to focus on when evaluating a potential DAO solution partner.

Excellent user experience. It is critical that the solution be exceptionally well-crafted from a usability point of view, or fast-moving, technologically adept consumers will move on to a better solution at a different bank. The flow must be smooth and logical, the interface must automatically resize to fit the screen (responsive design), and the information required to satisfy account opening requirements must be gathered in such a way as to not create abandonment. A skilled DAO provider constantly monitors each of these points in the flow (and more) and optimizes its solution to maximize conversion.

Core integration and operations. Every DAO solution has specific capabilities when integrating with core providers—pay attention to these. No solution has 100 percent core integration, just like all other third-party service providers. A bank should look for a DAO solution that maps well to its core and minimizes the implementation effort. Additional factors to consider include whether the DAO solution can create an account in real time (from the core’s perspective) and whether multiple bank products, which may be running in different software modules, can be accessed and opened at the same time—loans, debit cards, credit cards and the like.

Security and compliance. The alphabet soup of regulatory requirements makes innovation challenging for banks. Look for a DAO solution that maximizes security and makes use of the most current identity validation and verification protocols. Multiple layers of validation, from different external and internal sources, are a hallmark of a well-designed DAO solution.

DAO for the win

A bank that recently implemented omnichannel DAO found that 65 percent of its new consumer accounts were being opened and funded from mobile devices, excluding the traditional, browser-based process described earlier.

Mobile banking is a rising wave of efficiency on a sea of smartphones. It is a crucial strategy for banks to drive intergenerational customer acquisition, product penetration, loyalty, and retention—and it must be executed with the primary goal of an excellent customer experience. DAO is a foundational first step in a consistent mobile banking experience that wins and keeps customers.

Ed Gross is a director of payments and technology on ABA’s Endorsed Solutions team.