Online account openings can be a powerful tool for attracting retail banking customers—but they need to be done right.

That was the message from Eva Weber, an analyst at Boston-based Aite Group during a conference call last week. Weber spoke on the topic of online account openings in a session hosted by Tampa-based Onsite Conference.

Weber said online account opening has a lot of advantages over traditional in-person at-the-branch account openings such as lower cost ($15 per account for a fully automated opening versus $65 for a manually processed opening). “That kind of cost differential makes the business case for online account openings very compelling,” she said.

Other advantages of online account openings include fewer processing errors, a faster capture of customer assets and increased convenience to customers via 24 hour access, Weber said.

As a result, 64% of the top 25 banks now offer online account opening, although the features can vary by institution, Weber said. She added that she expects this growth to continue, particularly among smaller banks and credit unions, as customers become more comfortable with online technology.

The problem, Weber said, is that “if you’re going to do it, make sure you do it right.” Consumer convenience, integrated products and services and real-time funding of the accounts being opened are the key features required, she said.

Weber warned bankers not to “assume you’re marketing to the whiz kid generation.” She explained that not all customers who apply for accounts online will be proficient in online technology. “Regardless of the age or aptitude of users, most of them will go online for convenience and that means you need to deliver a quick and efficient account opening process.”

“These people are dealing with Amazon.com and eBay, so they’re going to be easily frustrated when a provider doesn’t sweat the details,” Weber added.

Real-time funding of the accounts is critical because it makes the process more convenient for customers and reduces the number of applications that are abandoned in mid-process, Weber said. Of the top 25 banks offering online account opening, she said, 81% provide online funding.  

“Large banks see the value in completing the online account opening process with a funding mechanism so you have a truly end-to-end solution,” Weber said. “To minimize attrition, funding is really key. Without it, your abandonment numbers could be through the roof.”   

Regulatory issues, Weber added, are not a big barrier for opening accounts online. She said the regulators allow financial institutions to use non-documentary methods to verify customer identification.

“I think regulators have made it pretty clear that they understand the importance of online functionality and they do not intend to forfeit that by writing rules that firms can’t deal with,” Weber said.

At the end of her talk, Weber was asked by an audience member about the loss of cross-selling potential when the application process is moved online. “You’re always going to have to weigh the risk of taking out that human-to-human intervention, but there are ways to cross-sell online, which are definitely viewed as a convenience by many customers,” Weber responded, noting that online customers can enter their personal information one time in order to apply for several products. 

“I think regulators have made it pretty clear that they understand the importance of online functionality and they do not intend to forfeit that by writing rules that firms can’t deal with,” Weber said.

At the end of her talk, Weber was asked by an audience member about the loss of cross-selling potential when the application process is moved online. “You’re always going to have to weigh the risk of taking out that human-to-human intervention, but there are ways to cross-sell online, which are definitely viewed as a convenience by many customers,” Weber responded, noting that online customers can enter their personal information one time in order to apply for several products. 

Subscribe to BAI banking Strategies: https://www.bai.org/services/dynamicpage.aspx?site=bai&webcode=pgOptInLanding&ic=BankStratRetailNewsletter_Website&WT.mc_id=BSRDI_V2_N3_SubscribeButton_01