The shift from in-person banking to online financial services has been happening for a while. Customers with increasingly busy lives continue to look for ways to lighten their workloads and simplify their lives, enter Digital Account Opening. As people realized they could preserve a significant part of their day by reaching for the phone instead of the car keys, the collective light bulb switched on. A considerable number of day-to-day tasks can now be completed without ever leaving your chair. Of course, the onslaught of Covid-19 drove nearly every retail, banking, healthcare, and educational institution to swiftly pivot. They had to embrace different ways of conducting business that would keep their teams, students, patients, and clients healthy at home.
What may surprise you is that this push for more customer-centric business models was not just driven by Millennials, but by all segments of the adult population. In fact, many older Boomers logged on for the first time in 2020 to keep in touch with family and friends, order groceries, consult their doctors, or perform a myriad of banking functions. So, not surprisingly, the largest banks were able to gain more market share by providing a one-stop shop for their customers looking for more innovative ways to manage their time and finances.
While nearly 80% of banking institutions provide some online services, less than 40% offer customers an option to open a bank account without visiting a physical branch. Many allow you to begin opening a digital account but will still require you to sign on the dotted line at a branch of the bank. With digital-only alternatives provided by companies like Chime, Ally, and SoFi, existing banks can no longer cling to traditional business models that don’t prioritize an extraordinary customer experience.
What is Digital Account Opening?
Digital Account Opening (DAO) is simply the process of opening an account from start to finish online. In a short period of time, online banking has become the preferred channel for financial transactions of all kinds. And if it continues to be reasonably simple and steadfastly secure, it won’t be long before consumers stop thinking of banks as buildings at all.
Consumers are the big winners here; no more standing in line or huddling in a cubicle with a smartly groomed loan officer. Instead, they log in to an app that delivers a highly customized experience ranging from depositing funds to applying for a mortgage. It’s easier for customers to make informed buying decisions when they see all their financial information in one place.
In addition to opening a checking account, consumers expect to be able to apply for personal loans, qualify for a mortgage, transfer funds, and check account balances anytime from any device. They also want peer-to-peer transfer capability, instant check deposit, and the ability to trade stocks virtually without a broker. Digital account opening usually consists of a few simple steps:
- First, provide essential information that establishes, then safeguards your identity. You know the drill: name, birth date, physical address, email address, and phone number.
- In some cases, you’ll be asked to upload supporting documents like a driver’s license or passport with photo identification.
- Verify your identity by clicking an email link or entering a code on your device.
- Deposit funds with a debit/credit card or a mobile check deposit through your phone’s camera.
Within seconds, your identity is not only verified but evaluated for risk and fraud threats. Most of the time, this entire process can be completed, start to finish, in under five minutes. If approved, your deposit is accepted, and your data is integrated with the core banking system. Digital is no longer the future of banking; it is the norm. According to FICO.com, there are five digital account opening maxims financial institutions need to follow to stay competitive in the Fintech space:
- First, create a best-in-class customer experience that attracts the most desirable customers.
- Zealously guard against fraud, protecting the business and customer.
- Keep fees low or non-existent to stand out in a highly competitive market.
- Understand what motivates your customer throughout the entire sales cycle. Know what moves them from awareness to action and
- Streamline the process to accommodate their needs. This isn’t limited to just the Fintech industry. Customers are notorious for abandoning any online application process that takes more than five minutes to complete.
As consumers become more digitally savvy, they will continue to demand security, convenience, and personalization when opening digital accounts. As a result, financial institutions or FIs must speed up their digital transformation. They must do so by building agile, scalable, and engaging DAO experiences that respond quickly to accommodate unexpected changes in consumer behavior.
Financial Services Accounts Need to Accommodate Changing Consumer Habits
It sure seems like the pandemic may have changed certain consumer behavior forever. What first began as a safety measure has changed the way we think about the value of our time. Any business selling online products or services has had to rethink production, sales, and delivery processes. Employers have to reconsider their resuming to business as usual as their teams resist returning to traditional office environments. No one is all that eager to return to the drudge of daily commutes and long-hour confinement to noisy, cramped office spaces after working from home for two years.
Companies like Stripe, Square, and Blend champion innovations that enable business owners and consumers to embrace new ideas and adapt to unexpected changes. They understand that acting as a “digital bank” involves more than simply enabling a consumer to complete transactions on a computer or a mobile device. Consumers want it all, to be able to purchase a car, qualify for a mortgage, create an investment portfolio, or open a banking account without ever leaving their homes.
The good news is there’s a thriving new industry capable of helping FIs improve the digital account opening process. These relative newcomers can help address pain points, increase customer engagement, and improve customer satisfaction.
Why Does Digital Account Opening Matter to Me?
Over the last ten years, traditional card-acquiring independent sales organizations (ISOs) have slowly evolved. While the majority have transitioned away from door knocking, they’ve yet to embrace the real shift in the market. It has been the software companies who have identified the unfulfilled needs of merchants and solved them with vertically integrated software. These merchants are now obtaining their payment accounts as a by-product of this software.
ISOs with foresight are attempting to support Independent Software Vendors (ISVs), Value-Added Resellers (VARs) & Vertically Integrated Software Platforms; however, they lack the tools required to compete with Stripe, Adyen, PayPal and the flurry of new Payment Facilitators (PayFacs).
By pursuing a foothold in the software market, ISOs may gain access to a new level of merchant accounts. Merchants that see the value of software are often more well established, demonstrate greater stability, and process higher payments. In addition, with longer-term merchant relationships and the right technology, ISOs can grow their product offerings to include additional services like payroll processing and invoicing.
The Fintech landscape is changing so rapidly that ISOs and sales agents should be concerned. As more traditional sales models become outdated, those organizations that can’t or won’t evolve will eventually disappear.
What Can I Do About It?
Under has developed a software platform that enables ISOs, Agents, PayFacs and Financial Services companies to provide digital account opening solutions to their customers. In our no-code platform, you can have your own digital with world-class identity and banking verification to filter out the wrong customers. Our platform automatically integrates this data to processor of your choice. In just a few clicks you can sell online, and empower your partners, agents, & ISVs to do the same.
Here’s a quick look at some of the services we provide for our clients:
Under provides a desktop & mobile friendly online application that can act as a pre-application or full application.
Turn on identity verification to focus on the right customers and eliminate potential fraud. Under helps you minimize supporting documentation and speed up approvals by turning on bank verification and automating transactional history.
- eSignature & .PDF Mapping
Collect signatures from your merchants immediately or after review. Automatically, populate your Merchant Processing Agreements, W9s, Purchase Orders, and more.
- Integrate Data Seamlessly
Automatically transmit applications to your Processor & CRM. Offer this to your agents and ISVs.
Focus on the ROI Digital Account Opening Brings
Customer onboarding is laborious and expensive. It often relies on multiple staff to manually key (or multi-key) deals into CRMs, onboarding systems, and more. Streamline your HR with a unified platform.
More importantly, focus on how to acquire more customers at higher conversion rates. According to the Digital Banking Report, 20% of potential online banking customers will abandon an inefficient sign-up process. Even banks offering digital account opening will lose customers if the process doesn’t include a mobile option.
Times have changed, and businesses need to evolve to meet the needs of their customers. We believe in the ISOs and Agents that have led the payment processing industry for the last 20 years, and we are excited to empower them to compete and thrive in this digital environment.