Digital account opening: Two takes on its future in the “next normal”

We gathered perspectives from executives at incumbent banks and cutting-edge vendors who are helping to shape the key digital account opening (DAO) trends. Here are two of the major takeaways from our discussions:

Analog account opening may see a moderate bounce back post-pandemic—but for DAO, the crisis was a watershed event.

What executives think: Kevin Kielbasa, head of business development at Narmi, said it’s likely that there will be at least “some bounce back in [branch] activity,” led by consumers who like face-to-face interaction or want to be helped through a transaction.

The degree to which the pandemic has cemented digital banking behaviors into consumers’ lives is not to be underestimated, however.

Fintech company nCino’s director of customer engagement Tatjana Bobic and its chief product officer Trisha Price expect that for simple deposit account types, there will be no analog bounce back at all. Bobic predicts:

• Physical channels will see regular ongoing use only for banks’ more complicated financial products.
• But even that usage is likely to peter out as digital applications become available for those offerings as well.

Insider Intelligence believes: The most profound effect of the pandemic on DAO may be increased use of digital channels to apply for complex financial products.

Looking at two major US incumbents that break out digital engagement—Bank of America and U.S. Bank—digital loan sales have spiked.

• Bank of America went from making only one in three loans through digital channels in Q1 2020 to making nearly half (49%) of loans via digital channels in Q1 2021.
• U.S. Bank was even more impressive, making 61% of loans digitally in Q1 2021 (up from 39% a year prior). The rapid growth of digital loan sales suggests that the pandemic may be converting consumers to digitally applying for more advanced financial products.

The competition for digital account opening will extend to driving primary bank status.

What executives think: FIs have set their sights on determining how to put their DAO processes to work alongside the rest of their digital offerings to drive primary bank relationships.

Gregory Brown, head of digital product management for growth and marketing at BMO, emphasized this, saying that that challenge is “a big focus, and it’s not just [BMO], it’s a lot of banks that have gone through the same evolution of driving a ton of [account opening] volume through digital, and then figuring out how those customers can be primary.”

Insider Intelligence believes: This is a top priority for neobanks—in particular as they strive for profitability and proof of the viability of their business strategies.

A huge majority (83%) of neobank account holders have a primary banking relationship with one of the top 20 US banks, according to data from Javelin Strategy & Research published in February 2021.

The long-term sustainability of neobanks will depend on their ability to turn the tables on incumbents.

For a deeper dive into what the trajectory of digital account opening will look like over the next few years for incumbent banks and digital challengers, read “Account Opening in the Next Normal: Digital Account Opening Interest Is Exploding, but Many User Experience Gaps Exist”