There is speculation that the downturn in the oil and related fracking industry somehow directly correlates to the number of banks and credit unions trying to add a feature allowing prospective customers to open accounts online and through mobile devices. Well we can lay that rumor aside. Yes, there is a correlation, having just visited a previous hotbed of oil/gas/fracking growth, I can attest that things seems to be cooling down in the oil fields. Correspondingly, everyone is hungry for deposits.
Banks and credit unions are looking to add the online channel as an offensive, additive measure to make sure deposit growth goals are met. Mobile and online are now an accepted and sought after capability. What percentage of community banks and credit unions already have the ability to open an account in self-service mode on their website or via Internet banking? Some estimate the percentage to be well less than half. Why so few given the technology has existed for years? Some of this can be attributed to inertia. Some avoided what they perceived to be a risky proposition. And some couldn’t afford it, as solutions which are fully integrated into the core banking system can be expensive to implement and support. Whatever the reason, what we know is that everyone is currently scrambling to add online and mobile account opening.
Mobile/Online Account Opening Considerations
The flood has started. And here is what we have learned about implementing mobile and online account opening. First, fracking caused this whole thing. Yes,we can blame fracking. Why not, fracking is being blamed for everything else, even the Tesla fires were loosely correlated to fracking, we digress.
Core integration. Required but raises the bar on ROI. Best is to automate. No manual intervention. This costs money. If volumes are going to be low, it could be hard to justify this up-front cost of integration. Small banks and credit unions want automation but might not be able to justify it given their lower processing volumes for new accounts opened online.
Deposit first, loans second. The focus seems to be on a deposit accounts first, low hanging fruit mentality. Then lending. The learning here are that certain third party vendors who provide new account open/onboarding solutions are good at one or the other but rarely both. Some are but those vendors are harder to find.
Account quantity/quality. Does the online channel ADD new accounts or displace accounts that would have been opened in the branch? Is the quality of the account the same as historical norms? Good questions and hard to answer. What we know anecdotally, is that branch new account flows and volumes tend NOT to be impacted early on when a bank/CU launches. We also know online account balances tend to be smaller and fraud CAN BE higher. All anecdotes not facts.
Workflow. Everyone wants flexible workflow for new account open. Everyone wants to IGNORE the third party vendors suggested BEST PRACTICE workflow. Mistake. The vendor knows what’s best so follow their lead. And yes, demand a flexible workflow tool so that the workflow can be changed, as inevitably it will need to be changed.
What To Do? Start opening accounts online IMMEDIATELY. If you don’t already do it, you now need to scramble and get it live ASAP. There are good vendors out there to help. Old encumbered and new entrants. Pick wisely. And don’t forget to add MOBILE as well as desktop. Yes, people are opening accounts on mobile phones, it works and it is fast. Join the stampede and get new account open “online” as quickly as you can.