Making Digital Account Opening Simpler, Safer, and Seamless
August 2015
Sponsored by:
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FORWARD
This whitepaper, sponsored by ID Analytics, explores the fundamental and
irreversible shift to digital account opening, and the challenges facing financial
institutions seeking to fulfill consumer expectations for a process that is fast,
simple, integrated, and secure. The whitepaper was independently produced by
JAVELIN.
JAVELIN maintains complete independence in its data collection, findings, and
analysis.
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DIGITAL ACCOUNT OPENING HAS NEVER BEEN MORE CRITICAL — OR MORE CHALLENGING
Bankers who foresee a day when consumers will routinely seek to open checking,
loan, and investment accounts in digital channels should rethink their timing. That
day is already here, and this irreversible shift is shaping not only the “branch of
the future” but also branch-centric banking. The inescapable truth is that
consumers demand omnichannel options and coordination that enables them to
open any type of account wherever they choose: in branches, through call centers,
online, and increasingly on mobile devices.
But what consumers view as a simple choice is far from simple to deliver. Building
better digital account opening presents multiple challenges for financial
institutions (FIs):
The process must be fast and simple. Consumers judge FIs based on the speed
and simplicity of digital channels. For new potential customers, the account-
opening process will provide a critical first impression of how an FI measures up.
The process must be integrated in an omnichannel strategy. Processes, the flow
of data, and security measures must be consistent and seamless so that applicants
can start in one channel and finish in another. This omnichannel demand will force
FIs to think as a coordinated team that balances marketing, user experience, risk
assessment, regulatory compliance, and other needs.
© 2015 GA Javelin LLC
Consumer Preferences Reach a Tipping Point for Digital Account Opening
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The process must be secure. Streamlined account-opening processes must
balance speed and security by quickly identifying applicants, verifying that they
are legitimate, and approving or rejecting applications nearly instantaneously. This
takes on added urgency because fraud trends point to a coming surge of new-
account fraud across a range of accounts.
The goal is to enable applicants to open and fund an account in one session,
regardless of whether the application is initiated online, on a mobile device, or at
a branch. FIs must prepare for a customer who might research a product online,
start an application on a laptop, smartphone or tablet, initiate a chat session,
phone a call center, transmit documents with a mobile camera, and seal the deal
in a branch. The application process also enables FIs to strengthen their
relationship with applicants on two levels, by improving onboarding that deepens
engagement with digital channels, and by presenting timely, personalized cross-
sale offers that can boost the customer’s profitability. In short, digital account
opening is an essential component for FIs seeking to empower customers and to
stake out a position as the customer’s primary FI.
If they were to open a checking account, more than half of consumers said
applying online or on a mobile device would have an advantage over applying at a
branch on three counts:
Most convenient to fit my schedule
Quickest application time
Best channel for comparing accounts and features
Consumers Give Digital Channels the Edge Over Branches for Convenience and Speed
© 2015 GA Javelin LLC
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USE DIGITAL ACCOUNT OPENING TO TARGET YOUR MOST PROFITABLE CUSTOMERS Digital account opening is a critical tool for FIs seeking to attract profitable
customers, deepen relationships with existing customers, and secure a position as
their customers’ primary FI. The question facing bankers today is whether their
current philosophy, processes, and systems cost them opportunities to win their
share of high-value applicants.
The coveted Moneyhawks® rank atop the list in JAVELIN’s holistic consumer
segmentation. These digital-first customers are the most wealthy, the most
vigilant, the most engaged, the most profitable — and the most fickle banking
customers. Although they constitute only 13% of U.S. adults, they control 72% of
the deposits held by consumers who are likely to switch FIs in the coming year.
When opening a checking account, Moneyhawks give the edge to digital channels
over branches time and time again. What they value most are the speed of
completing an application form, the convenience of digital applications, the fast
approvals, and the ability to obtain answers. And in a nod to the growing
importance of mobile account opening, 1 in 3 Moneyhawks used the mobile
channel rather than branches or online because they perceived it would be
speedier, yield faster approvals, be more convenient, and offer greater
confidentiality.
The Moneyhawks’ confidence in digital channels represents a double-edged
sword. It puts them on the cutting edge of online and mobile banking, where they
will define digital services for the majority of consumers. Yet their high
expectations make them difficult to please and fuel their fickle nature.
Moneyhawks cannot be an FI’s sole target for digital account opening — not if the
aim is to maximize the profitability of serving the 72% of consumers who are
Emergents or Traditionalists.
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Emergents: These young, mobile-minded consumers represent 35% of the
population but own 45% of the depository, loan, and investment accounts opened
in 2014. Their future economic clout will make them prime customers for
profitable loan and investment products and advisory services for years to come.
Online and mobile applications will be the norm for them.
Traditionalists: The affluent, online-centric Traditionalists are the largest segment
(37%). Because they are financially mature, they accounted for only 18% of the
accounts opened in 2014. Yet their loyalty and wealth make them important
targets for FIs seeking to use digital account opening to deepen existing
relationships. They also are crucial for FIs seeking to gain widespread adoption of
digital account opening, deeper usage of online services, and mobile banking
features such as alerts and mobile deposit.
When weighing whether to apply for a checking account at a branch vs. online or
mobile channels, Traditionalists have significant misgivings about digital channels’
ability to:
Protect personal data.
Preserve confidentiality.
Provide answers to questions.
Moneyhawks Seek Answers in Self-Service Channels; Traditionalists Want to Ask Questions
© 2015 GA Javelin LLC
21%
24%
35%
38%
46%
39%
45%
50%
28%
1%
1%
1%
1%
1%
2%
1%
3%
2%
79%
76%
64%
61%
53%
60%
54%
47%
71%
Online Mobile In-Branch
45%
33%
27%
22%
29%
26%
15%
16%
24%
20%
30%
31%
32%
25%
26%
33%
29%
13%
36%
37%
41%
46%
46%
48%
52%
55%
64%Easiest to obtain answers to questions
Most convenient to fit my schedule
Quickest application time
Fastest access to new account/funds
Best for comparison of features
Fastest approval/rejection notification
Convenient for additional documentation
Greatest sense of confidentiality
Safest for protection of personal data
MONEYHAWKS TRADITIONALISTS
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COMBAT THE COMING SURGE IN FRAUD One critical challenge is to streamline the digital application experience without
exposing an FI to greater fraud losses. This is particularly timely because JAVELIN
anticipates a spike in new-account fraud, which victimized 720,000 consumers in
the United States in 2014.
New-account fraud is one of the most damaging types of fraud for FIs and
consumers alike. Its impact includes the money lost ($2 billion in 2014), the time
FIs and consumers spend to resolve cases (25 hours per victim), and the long-term
damage caused to the victims’ lives and financial vitality.
In 2014, fraudulent applications for credit cards, checking, savings, mortgages, car
loans, and home equity lines accounted for an increasing share of new-account
fraud. Two factors are expected to boost losses at FIs even further:
Data breaches have compromised historic amounts of personal data. Data
breach notifications in the United States more than tripled in 2014, affecting
nearly 62 million consumers, up from 24 million the previous year. As a result, 8.5
million breach victims subsequently suffered from fraud, up from 7.3 million.
Breaches enabled fraudsters to harvest Social Security numbers and
unprecedented volumes of personally identifiable information they submit on
fraudulent applications.
The EMV transition is likely to trigger a surge in new-account fraud. The
transition to chip-embedded cards to authenticate purchases makes it more
difficult for crooks to profit from fake credit and debit cards. This is likely to
motivate crooks to rethink how they deploy their resources. Some crooks will turn
to card-not-present fraud, which is expected to maintain a steady rate but
increase in volume along with the increase in overall digital transactions. Other
crooks will take over existing accounts to dupe FIs into issuing cards that can be
used to purchase goods.
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And other crooks will stream online to apply to open accounts that will enable
them to obtain cards that their local crime rings can swipe at stores. This form of
fraud is one of the hardest forms of fraud to pull off, but it also is one of the most
profitable, with average losses of $3,200. For example, the number of fraudulent
account applicants climbed markedly in the years after EMV was rolled out in
Canada and the United Kingdom.
© 2015 GA JAVELIN LLC
New-Account Fraud, by the Numbers (2014)
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JAVELIN RECOMMENDATIONS Win together. Everyone at an FI should agree on the chief goal: Maximize the
number of completed, qualified, and desirable applications. That mission starts
with philosophical agreement that opening an account is a victory for the FI, not
for a specific channel or division such as branches or digital. Achieving that goal
will require cooperation and coordination across operations, marketing, risk
assessment, compliance, human resources, customer experience, and FI functions.
Build an integrated omnichannel process that focuses on consumer choice.
Consumers are sending a loud and clear message that they expect account
opening to be a quick and easy. By JAVELIN’s standard of success, consumers
should be able to open and fund an account in a single session using whatever
channel they choose. But FIs can also win by ensuring applicants feel the outcome
was smooth and seamlessly integrated.
Streamline digital account opening to improve onboarding and cross-selling
without compromising fraud security. From an operational perspective, digital
account opening must promise a better way to:
Quickly, consistently, and cost-effectively verify an applicant’s identity and
the funding account.
Stimulate engagement during the application process by streamlining
enrollment in online banking, mobile banking, bill payment, financial alerts,
personal finance management, and other features that deepen
engagement.
Immediately evaluate candidates for personalized, targeted cross-selling
offers during the application process.
Fulfill requirements for regulatory compliance and overall security.
Better evaluate and reduce fraud risks.
Rely less on personal information to verify identities. FIs must find more effective
methods to evaluate the identity of applicants to protect against the misuse of
stolen personally identifiable information and the proliferation of malware and
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botnets that generate fraudulent applications. One counter is to limit the use of
Social Security numbers for authentication and to incorporate unusual inputs such
as property records or data from social media. Another tactic is to integrate
authentication tools specific to digital channels, such as device reputation,
geolocation, and behaviormetrics.
Satisfy the needs of the digital-first consumer. Mobility is rapidly rewiring the
way consumers think. Digital-first consumers demand simplicity, anytime
convenience, real-time results, immediate decisions, transparency, and time-
saving options that supplant conventional methods safely and securely. That
means online and mobile account opening must be streamlined, walk applicants
through a simple process, make it easy to compare and select products, import
data the FI already has gathered in order to eliminate keystrokes and errors, verify
an applicant’s identity instantaneously, notify customers of the status of their
applications, clearly summarize legal disclosures and decisions, and so forth.
Target the most profitable customers first. Mobile-minded Moneyhawks are an
obvious starting point because they are the most profitable banking customers.
But do not lose sight of the Emergents and Traditionalists, who compose 72% of
the population. Design online and mobile account opening to satisfy lofty
expectations and the demand for speed, convenience, and a broad menu of
deposit, loan, and investment products. Mine data to prefill applications and shift
the applicants’ role from inputting data to confirming data.
Focus on engagement before cross-selling. Many bankers view the application
process as a time to cross-sell products and services aggressively. But it also is a
powerful opportunity to initiate onboarding that emphasizes customer
engagement with services that encourage habitual interaction, build the
customer’s sense of financial control, and develop trust and loyalty that lead to
future cross-sales. This includes establishing direct deposits, switching bill payee
information, spurring the use of debit cards, activating online and mobile banking,
and establishing mobile alerts.
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Address the Traditionalists’ perceived weaknesses of digital account opening.
Building confidence in the belief that digital account opening is better than
applying at branches will require:
Demonstrating that applicants’ information is secure and confidential.
Ensuring that applicants can readily obtain answers to their questions.
Enabling applicants to submit documentation without visiting a branch.
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METHODOLOGY
Consumer Data The consumer data in this report is based primarily on information collected in a
random-sample panel of 3,100 consumers in an August/September 2014 online
survey. The margin of sampling error is ±1.76 percentage points at the 95%
confidence level. JAVELIN evaluated account opening for nine types of financial
products: checking, savings, credit cards, auto loans, certificates of deposit,
mortgages, retirement accounts, brokerage accounts, and educational accounts.
Moneyhawks Segmentation JAVELIN’s retail banking customer segmentation incorporates scores of variables
regarding demographics, banking behavior, and attitudes about relationships with
FIs. Unlike approaches that use predetermined if/then rules regarding specific
behaviors or demographic characteristics, JAVELIN employs sophisticated
multivariate tools to develop a holistic segmentation based on multiple
dimensions, resulting in homogeneous segments that differ from one another on
such diverse criteria as how consumers prefer to interact with their FIs, what
products and technologies they use, their needs and attitudes, and their financial
value.
Fraud Trends JAVELIN’s 2014 ID Fraud Survey was conducted among 5,000 U.S. adults 18 and
older, from Nov. 11 to Dec. 2, 2014. The maximum margin of sampling error is
+/- 1.39 percentage points at the 95% confidence level.
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ABOUT JAVELIN JAVELIN, a Greenwich Associates LLC company, provides strategic insights into
customer transactions, increasing sustainable profits and creating efficiencies for
financial institutions, government agencies, payments companies, merchants, and
other technology providers. JAVELIN’s independent insights result from a uniquely
rigorous three-dimensional research process that assesses customers, providers,
and the transactions ecosystem.
Author: Mark Schwanhausser, Director of Omnichannel Financial Services
ABOUT ID ANALYTICS, LLC ID Analytics is a leader in consumer risk management with patented analytics,
proven expertise and real-time insight into consumer behavior. By combining
proprietary data from the ID Network®—one of the nation’s largest networks of
cross-industry consumer behavioral data—with advanced science, ID Analytics
provides in-depth visibility into identity risk and creditworthiness. Every day, many
of the largest U.S. companies and critical government agencies rely on ID Analytics
to make risk-based decisions that enhance revenue, reduce fraud, drive cost
savings and protect consumers. ID Analytics is a wholly-owned subsidiary of
LifeLock, Inc. Please visit us at www.idanalytics.com.
© 2015 GA Javelin LLC is a Greenwich Associates LLC company. All rights reserved. No portion of these materials may be copied, reproduced, distributed or transmitted, electronically or otherwise, to external parties or publicly without the permission of Greenwich Associates, LLC. GA Javelin may also have rights in certain other marks used in these materials.