Five Reasons Financial Institutions Struggle With Onboarding

Facing intense pressure to grow deposits, financial institutions obsess over how many new checking accounts they can open. But that's the wrong metric. Only 1 in 10 banking providers successfully engage new customers after opening a checking account, stifling their profits. Instead, financial marketers should focus on developing active accounts.

It’s no surprise that the number of new checking accounts opened is the metric that preoccupies most financial institutions. Financial marketers closely monitor the growth of the total number of deposit demand accounts they open, and employee incentives are often built around this number. But what happens after someone opens a new checking account? All too often, financial marketers haven’t got a clue.

Reality Check: A new account is not a new customer. It does not guarantee anything more than the initial deposit.

Opening a new checking account is only the beginning. Congratulations, you have acquired a new account, but unless the customer starts to use the account actively, you stand to lose money. According to research, financial institutions lose on average $66 per year for every account not actively used. That helps explain why only 45% of checking accounts generate acceptable revenues.

Many financial institutions effectively abandon their new customers and simply move from one account acquisition campaign to the next. According to the Digital Banking Report, a shocking 45% of banks and credit unions confess they don’t have a formal onboarding process — which means after a new account is opened there is zero outreach.

Of the remaining institutions claiming they do have an onboarding program, a whopping four out of five feel that the effort is not successful or cannot be measured. So that means a mere 10% of banks and credit unions are successfully engaging new customers after an account has been opened and can prove it.

“Even if an onboarding program is in place, no one is held accountable for the results.”

Why don’t financial institutions do a better job of welcoming a new customers and completing account activation? Here are a few reasons:

1. The drivers of profitability are poorly understood. The lifetime profitability of a checking account increases ten-fold, studies show, if consumers use at least three key services versus only one or two. At play is a huge upside profit potential if a bank or credit union could do a better job after the account is opened.

2. No one owns the welcome/onboarding process. The logical place to start onboarding is at the branch level. Typically, however, activation steps are left up to the customer to complete on their own. Even if an onboarding program is in place, pieces of it often fall into several departments. For example, marketing manages email campaigns, retail staff place phone calls and operations is responsible for generating direct mail letters. Significantly, no one area or person is held accountable for reporting on results.

3. Activation metrics aren’t being measured. Most banks and credit unions can easily recount how many new checking accounts they open per month. But ask how many checking accounts are actively being used, and they don’t have a clue. In many cases, the culprit is poor data collection and reporting. It can sometime take a herculean effort to quantify the usage of services like debit cards, online banking, mobile banking, or direct deposits. But you can’t manage what you don’t measure. And if it isn’t being measured, it’s not a priority.

4. Banking systems make the onboarding process clunky. To set up different elements associated with a checking account (debit card, mobile banking, etc.) consumers often must self-enroll multiple times, frequently with different user names and passwords, and always with different multi-page disclosures to be read. The result is that one in five new accountholders abandon the process. While some banks and credit unions are working to make “single-step enrollment” a reality, few have achieved it so far.

5. Employees are compensated based on the wrong metrics. While financial institutions continue to reevaluate incentive programs in wake of the Wells Fargo scandal, the number of new checking accounts remains at the center of many programs. As a result, employees may tend to focus on the account opening “transaction” and spend little or minimal time with following up to see if the new accountholder has adopted the additional services needed to fully use the account.

TrendWatch 2020: CX Is One Story Told in Five Parts
CX is a holistic strategy that begins at the consumer level—before they become customers—beginning with a consumer’s first interaction with your brand, wherever and whenever they encounter it.
Tuesday, February 11th at 2pm EST

The Solution: Shift Focus to Cultivating Relationships

Banks and credit unions must stop simply counting new accounts and shift their focus to developing a new relationship. Right after a new account has been opened, the first job should be helping the accountholder complete the activation process.

From there, relationship-building continues with regular and personalized communications. This can be a mixture of educational and helpful advice plus promotions for products for which the accountholder has indicated some level of interest. These communications will be better received once accountholders see you as their primary financial institution.

Intertwined within these communications should also be multiple mechanisms for feedback. This is important for two reasons. First, to shine a light on any part of the process that is causing undue friction. Second, to broadcast successes internally. This will help you educate your staff on the importance of account activation. Then you can also find new ways to measure those results and build incentive programs around them.

Also, considering outreach to existing customers. Demonstrate the benefits of the digital tools you have available, which may encourage them to adopt addition services and move them into more profitable territory.

Three Measurable Benefits From Engaged Customers

Building out a comprehensive onboarding program is not an easy task, but the benefits are well worth it:

1. Greater profitability. As previously noted, fully engaged customers contribute more to the bottom line. If your institution is typical, 44% of your current accountholders are only at break-even. Get even a small fraction of them to become fully engaged, and the upside is substantive.

2. Greater success in fulfilling additional and future needs. Another study illustrated that customers have 2.7 as many accounts at the institution that holds their primary checking account. Further, these consumers are far more likely to reach out to their primary institution for additional products when the need arises. Marketing to these people is also more likely to achieve better results.

3. Greater retention. Once new customers begin using their checking account and the related “sticky” services, it is up to you to keep them satisfied. But if you do, they are likely to stay with you longer. Understanding satisfaction levels is key to pinpointing cracks that need fixing — so your communications plan must be “two-way,” giving ample opportunity for your consumers to provide invaluable feedback.

So instead of simply keeping your eye on the volume of new accounts, shift your focus to activation rates. And if you don’t know what your checking portfolio looks like in terms of activation rates — it’s time to get your hands dirty and get to the real data. Because putting effort into turning each new accountholder into a fully engaged one will yield far greater profits for your financial institution.
