Now is a prime time for digital account opening

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How Americans bank has been changing for years, including how they start their banking relationships. Offering the ability to open an account online can be one way to reach customers who are unable to join your community bank in person.

By Jen A. Miller

A customer can make the decision to switch to a community bank or open their first bank account any time, any day, including outside business hours. When they can’t—or simply don’t want to—come to a branch, being able to open an account digitally is important, and increasingly in demand.

A recent McKinsey & Company report found that 15% to 20% of U.S. customers expect to increase their use of digital banking channels once the COVID-19 crisis passes. It also found that 60% to 85% of customers—even older ones—in western Europe want to handle everyday transactions digitally.

“Any digital transformation has been and will continue to be an important part of what community bankers are doing. That includes allowing customers to open accounts completely online,” says Charles Potts, ICBA’s senior vice president and chief innovation officer. “It’s a tool, but it’s not meant to replace important relationships between the customer and the bank.”

A ‘big bang’ for digital account opening

The Bank of Idaho integrated online account openings into its website in 2015. “When we expanded our internet banking services, we wanted to also include online account opening to expand our reach and serve more customers,” says Sara Wilmot, vice president and director of bank operations at the $700 million-asset community bank in Idaho Falls, Idaho. “We viewed it as a competitive necessity at that time, as so many other banks were offering the service on their platform.”

The community bank also saw it as a way to connect with the employees of its commercial customers, who wanted to bank with them “but could never leave work to come and open an account during regular banking hours,” Wilmot says.

At first, uptake was slow. Many customers wanted to meet with a banker face to face, Wilmot says. But more people who couldn’t come in during business hours took advantage of it than the bank expected.

The Bank of Idaho realized the full potential of digital account opening during the pandemic when its branches weren’t open to customers. “We were glad to have the service already available, with most of the kinks worked out long ago,” Wilmot says.

Spurred on by the PPP

The pandemic has been a “big bang” moment for this technology, Potts says, particularly due to the Paycheck Protection Program (PPP), which saw a flurry of new small business customers flocking to community banks, sometimes under short notice and at all times of the day and night. Community banks that had sat on the sidelines or had direct account openings in their short-term strategic plans rushed ahead. “They all jumped in and with every ounce in their bodies and just got it done,” he adds.

Those community banks realized that they could work with customers exclusively online “in a way that integrated consistently with the ethos that is important to community banks and their customers,” Potts says. Having a kind of “eject” button, where a customer could quickly reach a banker if they got stuck in the process, was helpful to both bankers and customers and maintained that personal feel, he adds.

For banks that have not yet integrated digital account openings, Potts suggests joining the 2022 ICBA ThinkTECH Accelerator, which kicks off on Jan. 11.

Offering digital account openings is no longer optional, according to Kathy Strasser, chief operating and chief information officer at $1.7 billion-asset IncredibleBank in Wausau, Wis.

IncredibleBank started as River Valley Bank’s digital-only web brand in 2009, back when its digital competitors were limited. In 2019, the two merged brands again under IncredibleBank. While it has 15 branches, the community bank also has accountholders in all 50 states, which makes the ability to open new accounts digitally a must.

Strasser says digital account openings are natural now because customer expectations have changed. “Companies like Amazon, Apple and Starbucks have recognized this shift in how consumers want to interact with a business,” she adds. “That not only applies to those businesses, but also banks. So, while these banks want to keep that community feel, you’re now offering what your customers want in addition to keeping those physical locations.”

6 steps to launching digital account opening

Community banks that use a digital account opening system see higher revenue growth than those that solely rely on opening them in person, according to Intellias. The international software firm says there are six steps to launching your own system, including:

  1. Understand your customers. Start potential digital accountholders with an online survey to learn more about their incomes, banking priorities and financial goals.
  2. Receive documents. Allow customers to digitally submit forms so you can collect know your customer (KYC) data.
  3. Create the account. Once you’ve received the necessary documents, open their account using Simplified Due Diligence (SDD), which can reduce risk.
  4. Do a background check. This is a chance to use artificial intelligence-driven tech to detect suspicious activity.
  5. Approve the account. Once the check is finished, you’ve verified customer information and are confident the account is secure, allow them access to all the features an account offers.
  6. Keep vigilant. Use KYC processes to detect unusual account activity.

—Tiffany Lukk

Jen A. Miller is a writer in New Jersey.