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Fixing the top of the digital funnel

Findings from a new BAI research program offer insights on how banks and credit unions can improve the account opening process.

Feb 10, 2023 / Digital Banking

Getting a would-be digital banking customer to start applying for an account is, relatively speaking, the easy part. Much tougher is getting that same person to finish that application: Research shows that up to 70% of applicants bail out before they get to the signature line.

BAI recently launched a new program called Digital Funnel Pulse to help financial institutions understand their top-of-funnel conversion metrics for deposit applications that result in open and funded accounts, and to allow them to compare their outcomes to industry peers.

We spoke with Isio Nelson, head of client engagement in BAI’s research division, about insights that the new DFP program is yielding for U.S. banking institutions to fine-tune their digital application processes.

The interview has been edited for length and clarity.

What have you discovered regarding some of the key reasons for high abandonment rates, and what impact does it have on banks?

Isio Nelson: There are two key leaks in the digital funnel that we’re seeing. The first is the customer experience—as banks basically took their offline forms and put them online, they found out that wasn’t the right way to do it. The second leak is related to authentication. There’s a balancing act where banks want to put some friction into the application process to try to thwart fraudsters, but many times that friction to authenticate gets too difficult for the good customers who are simply trying to open an account. If 1,000 people start applications but only 30% actually fund accounts, that means they have to drive more people to the site, so higher acquisition costs.

What else have banks learned about their application process when participating in Digital Funnel Pulse?

Well, most have learned that they’re not alone. When they’re looking at the numbers, they were thinking that they were failing and they were trying to figure out what they did wrong. When they look compared to other peers, some found out that they’re actually doing better and seeing that improvements that they’re making are building their yield. I think they’ve also learned how immature their data tracking and capabilities for the up-funnel data are. Ultimately, they are learning about what parts of the onboarding process they need to fix for new and existing customers.

How do these findings impact the push toward digital-first?

Instead of thinking about digital as a replacement channel, it needs to be thought of as a complementary channel. The branch is still very valuable for the bank and the consumer. Consumers want that personal touch. They need advice and even orientation about how to get value from the digital channels offered by the banks. There’s always going to be digital-only customers and it will grow over time, but right now it’s still a minority of people. So if banks do it right, they can have more engagement with more customers if they personalize the onboarding experience to the digital level that’s appropriate for the consumer originating the account.

Do the same digital trends also hold for small businesses?

Small business is following the same path as consumer, but I would say that they’re two to three years behind. Some lag is due to the complexity of some small businesses in their structure—sole proprietorships and partnerships and LLCs all have different types of applications. Online origination is only in the high single digits, but some recent survey data suggests that small business owners want to do more online. But because of the complexities, I think we’re still a few years away from any type of real scale.

Now that banks have begun to digest the data, is this a one-time fix or is this more of an iterative process?

For sure, it’s not a simple fix. Most banks are trying to improve one part of the funnel at a time to see which improvements yield the most. So we’ll go through what I call the four F’s: fill, fraud, fund and further expansion. For the fill side, banks are working with better consumer experiences, including pre-fill dynamic questions and recognizing current customers for different application fill requirements. For fraud, banks are finding better ways to authenticate, including ID capture, selfies and various authentication tools. For funding, the banks are working on steps to allow consumers to fund accounts immediately, but still capping that exposure. And further expansion—personalizing the digital experience in a way that doesn’t come across as robotic or saturate your customer with messages. It’s such a critical component for banks to digitize, and you might think it would be easy, but it’s actually difficult.

Terry Badger, CFA, is the managing editor at BAI.

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