Opening Online Bank Accounts (OAO): When It Comes to Consumers, Failure Is Not An Option

Oct 19, 2011

Opening Online Bank Accounts (OAO): When It Comes to Consumers, Failure Is Not An Option

Javelin’s Online Account Opening (OAO) Report Reveals Banks Are Unnecessarily Losing Over $873 million of Potential Revenue, As Consumers Walk Away Frustrated

San Francisco, CA, October 19, 2011 – On the heels of banks charging fees on debit card usage due to declining revenue, Javelin Strategy & Research’s latest research report — “2011 Online Account Opening (OAO): Faulty Process Hobbles FIs in the Battle for Customer Acquisition, Profitability and Retention” —  reveals that financial institutions (FIs) lost at least $873 million dollar, conservatively, in potential revenue, as 5.8 million customers attempted - and failed - to open accounts online (OAO). Encountering failure, consumers engaged in an application process that was more costly for FIs or abandoned their efforts and took their business elsewhere. The report is based on data collected from more than 5,000 consumers, as well as examination of online account offerings at the 10 largest U.S. FIs and five technologically oriented smaller banks and credit unions. Javelin identifies the obstacles consumers experience when opening accounts online, analyzes the success and failure rates of different consumer segments, and recommends specific actions FIs can take to fix the process.

First impressions are everything, and FIs risk their reputations - and relationships with customers - when the online application process goes awry. The desire to save time was the consumer’s primary motivation to apply online for a checking account.  However, only 53% of these applicants were able to successfully open and fund their account. The other half abandoned the process, had to go into the branch to complete the rest of the applications process, couldn’t open the type of accounts they wanted, or faced other issues.

“With 50/50 odds, a consumer’s chance of successfully opening and funding an online account is a virtual coin toss,” notes Mark Schwanhausser, Senior Analyst, Multichannel Financial Services at Javelin. “Successful online account openings reduce acquisition and servicing costs for FIs, launch new customer relationships, and deepen online relationships with more profitable, tech-savvy, self-service consumers.  Consumers that experience problems will go elsewhere, and FIs will miss out on revenue and cost-savings opportunities.”

FIs will learn how different consumer segments succeed - and fail- at opening accounts online. Javelin found that 68% of the tech-savvy Moneyhawks – who use online banking, pay bills through their primary FI, and use mobile banking -- were able to open and fund their online accounts.  This means that almost one-third of Moneyhawks was unable to open and fund a checking account online, a cause of concern for FIs that don’t want to lose their relationships with this most profitable consumer group.  FIs also risk losing revenue from the two-thirds of new customers who wanted to become a customer, but were unable to complete their applications online.

“Successful online account opening is key for all FIs and especially for smaller community banks that tend to draw a higher percent of newcomers, yet suffer higher failure and abandonment rates,” said James Van Dyke, President, Javelin. “Our report provides insight into how to improve the odds of successful online account applications for all consumer segments and establish effective online relationships with customers.”

Selected Key Report Findings – Online Account Opening

•    Nearly one-fourth of consumers applied online to open an account in the previous year, topped by checking, savings and credit card accounts.

•    “Secret shopper” survey of 15 banks and credit unions reveals that applications for other types off accounts are lower in part because FIs typically do not offer a full menu of accounts online. .

•    Mobile account opening is the next frontier, with insight from a credit union’s case study.

About Javelin Strategy & Research: Javelin Strategy & Research is the leading provider of quantitative and qualitative research focused on the global financial services industry. Our extensive quantitative data and deep analyst experience enable us to forecast the direction of the financial services market and make recommendations that empower you and your business to succeed.

For additional details or to purchase Javelin’s Online Account Opening report, click here: Online Account Opening

For more information about Javelin’s research services and reports, please contact:

Nancy Ozawa
Marketing Communications
(925) 219-0116